What can I do about Increasing PEO Rates?

For many businesses partnered with a Professional Employer Organization (PEOs), managing health insurance renewals is an expected annual task. This process usually involves ushering in open enrollment, ensuring all necessary documents are provided, and devising strategies to handle increasing health insurance costs. While PEOs excellently manage the first two aspects, the surging insurance costs present a significant challenge, often yielding drastic differences in renewal rates for employers.

The Dynamics of PEOs

PEOs are instrumental for businesses seeking administrative support. From human resources to payroll, PEOs offer a helping hand, also aiding in securing commercial and employee benefit insurances. However, the insurance domain, particularly health benefits, brings its own set of intricacies.

While the pooling of employer clients by PEOs can lead to beneficial health plans, there are instances when unforeseen, high medical claims result in steep renewal increases. Experiences of renewal rates soaring beyond 20% or even 50% are not unheard of, leaving employers in search of viable alternatives to manage the burgeoning costs effectively.

Strategizing for Sustainable Solutions

The impact of exorbitant renewal rates can leave employers contemplating benefit reduction or increased employee contributions. However, viable strategies exist to counteract this challenge, including:

Empowerment Through Choice

Despite the daunting prospect of high renewal rates, employers are not without options. Transitioning to the small group insurance market or shifting to a different PEO can pave the way for significant savings and more predictable health insurance costs. Seeking guidance from experienced professionals can illuminate the path toward a tailored solution that aligns with your business’s unique needs.

Navigating the landscape of Professional Employer Organizations (PEOs) and exploring the small group insurance market can be a strategic approach for companies facing steep health insurance renewal rates. Let’s delve deeper into each strategy to understand how they can present viable solutions and consider how to evaluate alternative PEOs or Human Resource Information System (HRIS) providers to ensure a more stable insurance cost landscape.

Exploring the Small Group Insurance Market

Understanding the Market Dynamics:

After the implementation of the Affordable Care Act, the realm of small group health insurance underwent significant changes. One of the pivotal alterations was the introduction of the modified community rating system, designed to ensure that small businesses are not penalized with higher rates due to employees’ health conditions or historical claims.

This system brings a level of predictability and stability that is often missing when dealing with PEO-managed health benefits. Annual premium increases are generally more consistent, usually capping at a manageable rate, which contrasts sharply with the potential volatility employers might face in PEO arrangements.

Steps to Transition:

Employers contemplating this shift should start with a comprehensive market analysis, comparing available plans’ costs, benefits, and coverage to determine the most fitting option. Engaging with an independent insurance broker can provide insights into the best deals available and facilitate a smoother transition process.

Considerations for Employers:

It’s crucial for businesses to evaluate the impact on their administrative burden. Moving away from a PEO could mean taking on more HR responsibilities internally. Employers should assess their capacity to handle these tasks or consider partnering with an HRIS provider for streamlined management of HR functions.

Considering Alternative PEOs

Evaluating Different PEOs

Not all PEOs are created equal. While some might pass the buck of high medical claims directly onto the employer through steep renewal increases, others adopt a more balanced approach. Certain PEOs establish reserve funds specifically designed to absorb the shock of high claims, promoting more stable renewal rates for all their clients.

Steps for Assessment:

Assessing an alternative PEO involves more than just comparing rates. Here are some steps to ensure a thorough evaluation:

Research their rating methodologies and financial stability:
Understanding how a PEO manages its insurance premiums and reserves can give insights into their ability to deal with high claims without passing excessive costs to clients.

Look into their HR and administrative support:
Assess the quality and breadth of HR services provided. A good PEO offers not just health benefits management, but comprehensive HR support tailored to your business needs.

Customer Service and Support:
Evaluate the level of personalized support provided. Dedicated representatives and responsive customer service can significantly improve the experience.

Client Testimonials and Case Studies:
Seek out feedback from current and past clients to gauge their satisfaction levels and how the PEO has handled their health insurance renewals and claims.

Assurance Through HRIS Providers:

When vetting alternative PEOs or considering the switch to managing HR internally with an HRIS provider, employers should look for platforms that offer robust reporting and analytics features. This can empower businesses with actionable insights to forecast benefits costs more accurately. Additionally, HRIS platforms often come with benefits administration features, making the management of health insurance renewals more streamlined and transparent.

Employers should inquire about the HRIS provider’s experience in integrating with various insurance carriers and their ability to provide advisory services related to benefits selection and management. This partnership can offer a sustainable path forward, reducing reliance on the PEO model for health benefits while still ensuring effective HR management and compliance adherence.

The decision to switch from a PEO to a small group insurance market or transition to an alternative PEO should be made after careful consideration of your organization’s specific needs, capabilities, and long-term objectives. Both strategies require diligent research and planning but can lead to more predictable and manageable health insurance costs. Engaging with knowledgeable partners, whether it’s an insurance broker, a new PEO, or an HRIS provider, can guide your business through this complex landscape towards a solution that aligns with your goals.

Empowerment Through Choice

Despite the daunting prospect of high renewal rates, employers are not without options. Transitioning to the small group insurance market or shifting to a different PEO can pave the way for significant savings and more predictable health insurance costs. Seeking guidance from experienced professionals can illuminate the path toward a tailored solution that aligns with your business’s unique needs.

Navigating the landscape of Professional Employer Organizations (PEOs) and exploring the small group insurance market can be a strategic approach for companies facing steep health insurance renewal rates. Let’s delve deeper into each strategy to understand how they can present viable solutions and consider how to evaluate alternative PEOs or Human Resource Information System (HRIS) providers to ensure a more stable insurance cost landscape.

Considering leaving your PEO? Tesseon’s dedicated PEO Exit Management team provides expert guidance to ensure a seamless transition. Our comprehensive services include payroll setup, benefits coordination, compliance management, and dedicated support throughout the process. Trust Tesseon as your strategic partner for navigating a successful PEO exit while minimizing disruptions to your business operations. Contact us today to discuss your needs and explore a tailored solution.