What Is A Multiple Employer Trust For Low Cost Heath Insurance?

By Robert Fredricks Posted in Health Insurance News



Many employers struggle to keep the cost of health insurance for their employees at an affordable level. Affordable both for the business as well as for the employee.

Group health insurance is typically priced based on an experience rating of the group being insured. Experience ratings spread the risk of the insurance provider across all members enrolled in the plan. This includes the employees enrolled as well as their enrolled spouses and dependents.

If a single member of the group has high health care expenses as compared to the typical member, the price charged by the insurance provider must be enough to cover the health care expenses of the typical member for each member enrolled plus enough extra per member to cover the higher health care expenses of that single member. If the group is fairly large, the impact of the single member’s higher than average expenses will have little impact on each of the other members, since the higher expenses would be ‘spread’ over the large number of members.

Multiple Employer Trusts Help Businesses Lower Their Health Insurance Costs

One option available for business owners is a Multiple Employer Trust. With a multiple employer trust, the members of the group being insured come from all of the enrolled employers. This forms a larger group and the experience rating is then based on this larger group. The insurance provider can spread the risk of higher claims across all members of the group and with a larger group, the impact per member is less significant than when each employer is grouped separately.

A Multiple Employer Trusts also provide lower plan administration costs. There are administration costs associated to the insurance plan as well as to each member enrolled in the plan. By forming a single larger group covered through a single plan, the administration costs of multiple plans (one per employer) is eliminated. As the Multiple Employer Trust grows through the addition of more employers, the administration cost savings continue to grow.

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