What is a consortium?
The consortium model for obtaining insurance is a rising trend in today’s benefits landscape. A consortium is formed when two or more organizations join together to leverage their purchasing power for a particular service – such as insurance. As a result, forming a consortium strengthens an organization’s ability to negotiate lower costs and streamlines processes for its members. With the increasing financial volatility of the insurance marketplace, consortiums can serve as a stabilizing economic presence to their members.
Who does a consortium serve?
In the case of consortiums that purchase benefits, members with a common interest, such as school districts, cities and counties, colleges and universities, and sometimes private companies, band together under one benefits umbrella.
What are benefits to participating in a consortium?
When two or more organizations form a consortium, the participating group is larger than each organization individually. Having a larger risk pool allows the consortium to negotiate the best coverage at lower premiums for its participants, and allows the insurers to reduce their administrative costs by consolidating marketing and billing. The consortium can use its buying power to tailor benefits needs for a particular demographic, be it school district employees, retirees, government employees, etc.
The future of insurance consortiums
As insurance consortiums grow in popularity, potential member organizations will gain a better understanding of the cost benefits of consortiums, and service providers will seek solutions to the potential obstacles that may arise when dealing with a more complex member structure. In the future, insurance consortiums will continue to prove a viable solution to the changing benefits needs of their member organizations.
This article is intended to provide accurate and authoritative information on the subject matter covered. It is distributed with the understanding that FBMC is not rendering professional or medical advice and assumes no liability in connection with its use.
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