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Should You Consider a Pooled Purchasing Arrangement?

• Pooled purchasing arrangements allow agencies to gain better purchasing power to lower their costs and often obtain coverage, terms and services they might not get as a single entity
• Employee benefits JPAs, as well as joint labor-management benefit trusts are resources for schools and local agencies to find relief from financial and administrative burden

Budgets, staffing and risk are frequently top of mind for the management of every organization. The challenges added by the pandemic have made these concerns even more acute – with extended shortages of the first two and a surplus of the third! The areas of insurance and employee benefits impact all three in direct ways and call for solutions that reduce the pressure on financial, personnel and risk management resources.

Public agencies and school districts in particular have been hit hard in coping with COVID while maintaining their fundamental missions in our communities. One approach for employee benefits and insurance these public organizations have available is through pooled purchasing arrangements. While they take different forms in structure and governance, they are basically formed by similar agencies getting together to purchase property and casualty insurance, health and welfare coverage, and related services as a group. Buying as a group, the agencies gain better purchasing power to lower their costs and often are able to obtain coverage, terms and services they might not get as a single entity.

In property, liability and casualty insurance, pooled programs are available from statewide or regional joint powers authorities (JPAs) providing a range of options for coverage limits, self-insured retentions, and ancillary services. Each member organization can make choices to meet their budget, risk tolerance and internal resources. Availability of loss control services, which can include hazard identification and mitigation, safety and mandated training, can help reduce loss experience and provide additional premium savings over time.

Employee benefits JPAs, as well as joint labor-management benefit trusts are other resources for schools and local agencies to find relief from financial and administrative burden. Again, the combined purchasing power of multiple agencies helps with negotiating more favorable rates than most single districts and agencies can obtain on their own. Wellness programs and special features like gym memberships, telemedicine, hearing and eyewear discounts are possible enhancements through pooled purchasing arrangements. Some pooled programs provide eligibility and enrollment automation to member agencies, helping to significantly ease administrative burden on benefits staff.

There are many advantages of pooled purchasing arrangements, but finding the right fit for each agency requires looking into the details. For instance, in selecting participation in a JPA for health coverage, it’s critical to ensure the health plans offered have a provider network well matched to your employees’ location. In property, liability and casualty, it is important to address any specialized risks for your organization. Such factors can depend on geographic location, demographics, types of facilities and infrastructure; for schools, unique types of educational and vocational training programs must be considered.

Pooling is not a solution for every school district or public agency. Organizations that need very specific customization of their insurance portfolio may not find sufficient flexibility from a pool. Participating in a pool also makes you a part of the entire pool’s spread of risk. Catastrophic losses outside your own agency can, in some cases, result in additional assessments. Understanding the underwriting requirements and reserving policies of a pooled arrangement is a must before joining.

Even if you don’t think a pooled purchasing arrangement is right for your organization, it may be prudent to revisit consideration of that decision periodically. Many JPAs are developing innovative approaches to address the insurance needs of their member agencies and assisting them with resources to prevent losses and promote healthier employees.

About Bordan Darm
Bordan Darm is an Account Executive with more than 30 years in the employee benefits industry in Account Management and Sales. He has provided senior account management to private and public entities from all facets of the health care industry including Carrier, Third Party Administrator and Broker/Consulting. Bordan is a subject matter expert for the technical and financial valuation of health plans, Health Care Reform and legislative compliance. Bordan is experienced with all funding mechanisms and works with fully-insured, minimum premium, and self-funded plans.