As employers confront a confusing, costly and often frustrating market for employee health benefits, it’s only natural that they start to weigh alternatives to the status quo. One option that is sometimes considered is to enter into a Professional Employer Organization, or PEO. If you’re looking into this as an option, you’re likely doing your due diligence. As you consider the pros and cons, be sure to get comfortable with the answers to these questions as well:
Is group health insurance right for your employees?
Despite having a unique arrangement between the PEO and your organization or business, at its core the health insurance plan you receive will be fundamentally the same as a group plan. As we’ve discussed before, there are alternatives to group insurance, including the individual market, that can be a much better fit from both a financial and plan design perspective. Understanding whether group or individual health insurance is better for your employees is fundamental.
What are you paying, and what are you paying for?
Fee transparency varies among PEOs, so you’ll want to be crystal clear on what fees you’ll pay, including those related to your health insurance plan. You’ll also want to probe on any rate “adjustments” related to your coverage, potential adverse selection loads, or the possibility of requirement of other outsourcing services. As with any contract – but especially with something that could be complex like PEO arrangement – it’s worth it to take a deep dive and truly understand the costs and value.
Will your employees love what PEOs provide?
Not only can the idea of co-employment be confusing to employees, their experience with health coverage under a PEO arrangement can also be an unknown. Depending on the size of the PEO, there may be one or more insurance carriers that bring a handful of plans forward as options for employees. The specifics of these options can be more limited compared to the individual market, where they can be dozens or hundreds of options. Similar to group plans, employees can be frustrated by more limited choices, which is a potential downside for going the PEO route. Understanding what’s being offered from the PEO and how well that matches your employees’ needs is both important and challenging. To shed more light on this experience, dig deeper. Does the PEO have the expertise to answer plan selection questions? How do employees rate their experience with the PEO?
Most employers look into PEOs because they want to outsource non-core activities, especially health benefits administration. But, a better step towards relieving this administrative burden and keeping costs in check is moving to the individual market. Considering the three questions above, the individual market – supported with a partner like Gravie – can be a much smoother path to controlling costs, avoiding fees, understanding costs/value, and providing employees the options that fit their unique situations.