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By banding together in association health plans, small businesses can cut costs down to size

Depressed about ever-soaring health-care costs? Perhaps it's time for some group therapy.

No, we're not suggesting a shrink. But you might find it therapeutic to join the thousands of other entrepreneurs who are keeping costs down by joining association health plans, or AHPs. Such plans allow small employers to band together and flex big muscles in the health-care marketplace. There are about 1,000 AHPs scattered across the country, and members have been seeing average discounts of 10%. That's just what the doctor ordered, considering that insurance premiums for small companies are expected to jump some 20% this year.

With AHPs, an association--usually an industry or trade group--uses the added clout of the pool to bargain with insurers for competitive rates and better plan designs. A good example is NFIB Health Benefits, a two-year-old AHP sponsored by the National Federation of Independent Business, which covers more than 1,000 companies in 17 states. Specialized Transport Service Inc., a 10-employee trucking company in San Antonio, Tex., joined in January and now gets better coverage while paying a few percentage points less in premiums. "Our old plan didn't have maternity or dental coverage, and the prescription drug benefits weren't nearly as good," says Sherrie Shirky, the company's office manager. NFIB also intervenes if providers don't process claims on time.

AHPs are not a new idea. They were popular about a decade ago, until a series of scandals gave them a black eye. That sliced the size of the association health-plan market from $12 billion in premiums in 1992 to about $6 billion in 1997, the last year for which data are available. Today, however, most AHPs are all fully insured under new state regulations.

To sign up, you need to belong to the sponsoring association, many of which actively recruit new members. Your local chamber of commerce should be able to help you track one down. In many cases, the AHP will enable you to customize your health coverage. The plan sponsored by the Associated Builders & Contractors, for example, covers the cost of safety glasses used by industrial workers--a benefit not included in most vision plans.

AHPs can't always work wonders. They aren't much use in the nine states where insurance law forbids price competition. But small-business advocates are lobbying Congress to regulate the plans federally instead. So stay tuned. With costs spiraling out of control, AHPs may keep you off the psychiatrist's couch.

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