BOSTON, MA--(Marketwire - Apr 12, 2011) - Can smaller employers effectively band together to buy health insurance to get the same purchasing power, market leverage, and economies of scale that larger employers enjoy?

Patrick J. Haraden, principal of Longfellow Benefits, tackles that question in the April issue of Benefits Magazine.

The new Patient Protection and Affordable Care Act (PPACA) and the Health and Education Reconciliation Act (HERA) include state-based insurance exchanges and co-op insurance plans, which incorporate some of these group-purchasing concepts, Haraden points out.

"As health insurance costs continue to rise, state and federal regulation and reforms becomes more complex and administration more burdensome, many employers are looking to further expand their group purchasing, by evaluating purchasing employee benefits under a group-purchasing model with other employers," he writes.

Massachusetts has already implemented many of these changes and serves as a national model.

Group purchasing should produce lower initial rates and lower rates of increase than because of opportunities to target wellness and other initiatives to help reduce costs, Haraden writes.

But skeptics contend that group arrangements will increase administrative costs for health plans, fracture the small-group market between the healthy and unhealthy, and not lower the overall cost of care since they do not address key cost drivers, even with a wellness component, he adds.

Successful group arrangements need:

• Strong, effective leadership
• Long-term commitment by employers
• Large size to negotiate rates and measure results
• Rules and regulations surrounding rating, membership, administration
• Outside advisors
• Additional services - wellness, health promotion and advocacy services not available to small groups

The regulatory environment is bullish for the formation of group purchasing arrangements. The PPACA will provide small businesses with some alternatives to traditional community rating.

Employers should evaluate all of their options, weighing not only the cost savings, but the impact on employees and long-term strategic and regulatory implications of a group purchasing arrangement, Haraden concludes.

The full article is available at http://www.ifebp.org/exclusive.

Serving organizations in New England and nationally, Longfellow Benefits provides employee benefits consulting and executive benefits consulting services and Longfellow Advisors provides retirement plan services. Longfellow has been named to Boston Business Journal's Best Places to Work five years in a row.

For more information, visit www.longfellowbenefits.com or call 617-351-6000.