Associations, trade groups offer members group-like health insurance

An increasing number of small-business owners that do not provide health insurance to their employees and individuals without employer-based health coverage are looking to professional organizations and trade groups that offer "group-like" coverage to their members, the Wall Street Journal reports.

According to the Journal, organizations such as state medical associations, bar associations, chambers of commerce and other associations frequently offer dues-paying members the option of purchasing insurance through them. The Journal reports that coverage purchased through these groups mirrors employer-based coverage, and even with membership fees is often less expensive than purchasing individual coverage in the private market.

However, because purchasing insurance through a professional group is "more loosely regulated" than the individual or employer-based coverage market, the cost, quality of coverage and remedies for "consumers who feel they have been wronged" can differ substantially, according to the Journal. In addition, fraudulent insurance can be sold through both legitimate and fake associations. According to a 2004 report by congressional investigators, 144 such scams occurred from 2000 to 2002 that left more than 200,000 policyholders responsible for medical bills of more than $252 million.

In addition, many people confuse association plans with employer-sponsored or group coverage. Employer-sponsored plans are mandated by federal law to accept all applicants and charge all beneficiaries equal premiums. However, association coverage is regulated by state law -- if it is regulated at all -- allowing insurers in association plans to choose their policyholders, according to Kevin Lucia, an assistant research professor at Georgetown University's Health Policy Institute. While younger, healthier policyholders who often have fewer pre-existing health conditions can benefit from these plans, others could be charged more for the same coverage (Knight, Wall Street Journal, 8/12).