Group Purchasing Arrangements

Group purchasing arrangements (GPA) are public or private efforts to allow more than one small or large employer and/or individuals to pool together to collectively purchase health insurance. They seek to achieve lower cost premiums by bringing smaller groups together to achieve the buying power of large groups. Some GPAs are established through state legislation or regulation, while others are formed by associations of employers and/or individuals. There are a number of forms of GPAs, including association health plans (AHP), employer alliances or health insurance purchasing coalitions (HIPC), and multiple employer welfare arrangements (MEWA). Because most states either have a MEWA or have access to one from another state, MEWAs are not included in the coverage matrix. For more information on MEWAs, see the MEWA database at www.hcfo.net/mewa.

Existing GPAs have expanded consumer choice, but there is little evidence that the current models have significantly reduced the number of uninsured.¹ Purchasing arrangements, in theory, could reduce administrative costs and give small groups bargaining clout, thereby reducing premiums. Evidence suggests prices are comparable inside and outside the purchasing groups.² Still, purchasing arrangements continue to be of interest to both state and federal policymakers seeking to use the buying power of large groups to expand health insurance coverage.

GPAs may have an impact on the existing small group and individual markets in a state so there are critical issues for state policymakers to consider, including:

• What groups can come together to purchase insurance?
• What state regulatory rules apply to them?
• Will the regulatory rules (solvency, consumer protection, rate review) that apply to GPAs be similar to other insured groups?
• What will the impact of GPAs be on the functioning of the overall state health insurance market?
• What is the likely impact on the uninsured?

The federal debate on GPAs largely centers on proposals to allow employers or individuals to purchase insurance through AHPs. The federal proposals for AHPs would allow creation of both inter- and intra-state plans, which would not be subject to the many state insurance requirements, including minimum benefit packages, prompt payment to providers, and access to state-required appeals processes (by extending ERISA preemption to AHPs). Proponents for AHPs suggest that small businesses and individuals would gain bargaining power in the markets; however, opponents view dropping benefits currently mandated by state legislation as a strategy that would likely appeal to only the healthiest groups and raise costs even more for those less-healthy groups who are not in the AHP.

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