Society For Human Resource Management (SHRM) Certified Professional Practice Exam

A small business that aligns with other small businesses to establish a combined plan will participate in what?

1. Health purchasing alliance

2. Partially self funded plan

3. Administration plan

4. Service-only plan

The correct answer is: Health purchasing alliance

A small business participating in a combined plan with other small businesses is engaging in what is known as a health purchasing alliance. This structure allows multiple businesses to come together to negotiate better rates and benefits for health insurance by leveraging their collective size. By forming an alliance, these businesses can share the costs and risks associated with health coverage, ultimately making it more affordable and accessible for each participant. Health purchasing alliances work to provide small businesses with the bargaining power that larger organizations typically have, leading to enhanced insurance options and potentially lower premiums. This collective approach is particularly beneficial for small businesses, which may struggle to afford comprehensive health insurance on their own due to limited economic clout. Other potential options do not align with the concept of pooling resources and leveraging size for better health insurance outcomes to the same extent. Partially self-funded plans, while a viable option for some businesses, typically involve the employer taking on more risk, which may not suit the needs of all small businesses. An administration plan generally refers to a strategy for managing operations and is not specific to health insurance. Meanwhile, a service-only plan does not cover health risks and thus would not address the collective needs of small businesses seeking health coverage.