PEO Health Insurance: Affordable Solutions for Businesses

Updated August 15, 2024. Originally published June 26, 2018.

If you run a growing business, you know there are many administrative duties to manage, including health insurance. In today's competitive job market, offering good health insurance is crucial for attracting and retaining talented employees. While this is essential for your business and team, navigating the health insurance market can be exhausting, time-consuming, and costly.

After wages, benefits are the second highest employee-related cost—and they’re continuing to rise. The Kaiser Family Foundation reported in its Employer Health Benefits Survey that the average cost for employer-sponsored health premiums in 2023 was $8,435 for individuals and $23,968 for families. The distribution of premium costs between employers and employees varies. Generally, employers cover the majority of the premium for employees and around half of the premium for dependents.

Professional Employer Organizations (PEOs) offer an effective solution by providing group health insurance plans that benefit small and medium-sized businesses. By pooling employees from multiple companies, PEOs can secure better rates and more comprehensive coverage than individual businesses could on their own. This blog explores how partnering with a PEO for health insurance can streamline your company's processes and improve employee satisfaction. Read on to discover the advantages of choosing a PEO for your group health insurance needs!

What is a PEO?

A Professional Employer Organization (PEO) provides comprehensive HR solutions for small and mid-size businesses. As one of the most comprehensive support solutions available for businesses, PEOs help offload time-consuming responsibilities like HR and payroll administration, quarterly reporting, workers’ compensation claims management, and employee benefit procurement.

According to the National Association of PEOs (NAPEO), small businesses that work with a PEO grow 7 to 9 percent faster, have employee turnover that is 10 to 14 percent lower, and are 50 percent less likely to go out of business. The return on investment of using a PEO, in costs savings alone, is 27.3 percent. Currently, PEOs provide services to more than 200,000 small and mid-sized businesses, employing 4.5 million people.

Here is a simple overview of what a PEO like FrankCrum can do for you:

• Payroll and Taxes: PEOs manage payroll processing, ensuring employees are paid accurately and on time. They also handle tax filings, deductions, and compliance with federal and state tax regulations.
• Employee Benefits: PEOs offer a range of employee benefits, including health insurance, retirement plans, and 401(k) plans. By pooling employees from various businesses, PEOs can secure better rates and more comprehensive benefits than individual businesses could obtain on their own.
• HR Support: PEOs provide assistance with HR tasks such as recruiting, onboarding, employee relations, and performance management. They ensure compliance with labor laws and implement best practices to enhance workplace productivity and culture.
• Risk Management: PEOs help manage risks by providing workers' compensation insurance and implementing safety programs. They assist in developing risk mitigation strategies and handling claims efficiently.
• Compliance Assistance: PEOs stay up to date with changing employment laws and regulations, helping businesses remain compliant and avoid legal issues. They manage compliance with laws such as the Affordable Care Act (ACA), Family and Medical Leave Act (FMLA), and Occupational Safety and Health Administration (OSHA) regulations.

By working with a PEO, business owners can focus on growing their companies while the PEO handles administrative tasks that would typically divert the owner's attention from strategic growth.

What Are the Benefits of Partnering with a PEO for Health Insurance?

Partnering with a PEO for health insurance offers numerous advantages that can significantly benefit small and medium-sized businesses. One of the primary benefits is cost savings. PEOs leverage the collective bargaining power of multiple businesses to negotiate lower health insurance premiums and secure better plan options. This can result in substantial cost reductions compared to obtaining insurance independently.

In addition to cost savings, PEOs provide a wide range of comprehensive coverage options, including medical, dental, vision, life, and disability insurance. This variety ensures that employees can choose plans that best meet their individual and family needs, which can greatly enhance employee satisfaction and retention. Offering high-quality health insurance plans through a PEO can make a business more attractive to top talent, helping to recruit and retain skilled employees.

Managing health insurance can be a complex and time-consuming task, but PEOs alleviate this burden by handling all aspects of benefits administration. From plan selection and enrollment to claims processing and employee support, PEOs streamline the entire process. This allows business owners to focus on their core business activities without getting bogged down by administrative tasks.

As businesses grow, their health insurance needs may evolve. PEOs offer scalable solutions that can adapt to the changing requirements of a growing workforce, ensuring continuous coverage and support. By partnering with a PEO like FrankCrum, businesses can access these benefits and more, making it easier to provide high-quality health insurance to employees while maintaining focus on strategic growth and operational efficiency.

What Types of Insurance Can PEOs Offer?

PEOs provide businesses with access to a broad range of insurance options, ensuring that employees receive comprehensive coverage while alleviating the administrative burden on employers. By leveraging the collective bargaining power of multiple businesses, PEOs can secure better rates and more extensive coverage options than individual companies could obtain on their own.

Below, we will further explore the various types of insurance and plans that a PEO can offer to your business.

Health Insurance

Health insurance is one of the most critical benefits offered by PEOs. They provide various plans, including:

• HMO (Health Maintenance Organization): An HMO plan typically has a lower cost but requires employees to choose a primary care physician within a network and obtain referrals for specialist services.
• PPO (Preferred Provider Organization): A PPO plan offers more flexibility, allowing employees to see any healthcare provider, though it may come with higher out-of-pocket costs for out-of-network services.
• High-Deductible Health Plans (HDHPs): Paired with Health Savings Accounts (HSAs), these plans have lower premiums but higher deductibles, providing a tax-advantaged way to save for medical expenses.

Dental and Vision Insurance

PEOs often include dental and vision insurance as part of their benefits packages. These cover routine check-ups, treatments, and corrective measures, enhancing overall employee well-being.

Life Insurance

Life insurance policies provided through PEOs offer financial security to employees' families in the event of the employee's death. These policies can include:

• Term Life Insurance: Generally, more affordable than permanent life insurance. It provides coverage for a set number of years, paying out as long as your policy hasn't expired, and you've paid the premiums.
• Whole Life Insurance: Whole life insurance is permanent life insurance, meaning it will pay a specific death benefit, or payout, in return for your paying the premiums. As long as you make your payments as agreed upon, you will be covered for life.

Disability Insurance

Disability insurance ensures that employees have income protection if they are unable to work due to illness or injury. PEOs typically offer:

• Short-Term Disability (STD): Short-term disability insurance may replace all or a percentage of your income when you’re temporarily unable to work due to a non-work-related illness, injury, or medical condition. The income replacement from Short-Term Disability is for a limited period.
• Long-Term Disability (LTD): Long-term disability insurance is a policy that can replace a portion of your income after a qualifying injury or illness. It can help you pay for expenses to maintain your standard of living when you’re unable to earn a paycheck over an extended period.

By partnering with a PEO, businesses can streamline their insurance offerings, ensuring that employees receive comprehensive and competitive benefits. With FrankCrum as your PEO, you will also have an assigned Benefits Representative to help you and your employees navigate the different types of plans and offerings, ensuring a seamless experience.

How Much Does Offering Health Insurance Cost to Employers?

Providing health insurance can be a significant expense for businesses, with costs varying widely based on company size and the number of employees. Larger companies, such as Fortune 500 firms, often secure lower rates, more plan options, and better coverage due to their substantial employee base. Conversely, small businesses might face higher premiums and limited options, often paying hundreds of dollars per employee for less coverage.

Not using a PEO for health insurance can result in elevated costs for business owners due to several factors:

• Increased Premiums: Without the negotiating power of a PEO, businesses may encounter higher health plan premiums. PEOs leverage the collective buying power of multiple businesses to secure lower rates from insurance providers.
• High Administrative Costs: Independently managing health benefits can be both costly and time-consuming. Business owners must allocate resources to handle plan selection, enrollment, claims processing, and employee inquiries, driving up administrative costs.
• Limited Plan Choices: Small businesses often have fewer health insurance plan options, restricting their ability to cater to diverse employee needs. PEOs, with their larger pool of insured employees, can offer a wider range of plan options.
• Compliance Challenges: Navigating the intricate landscape of health insurance regulations without expert assistance can be daunting. Businesses risk non-compliance with federal and state laws, which can result in penalties and legal expenses. PEOs aim to mitigate these risks by helping businesses adhere to all relevant regulations.
• Higher Employee Turnover: Without competitive health benefits, businesses may experience increased employee turnover, as workers leave for companies with better offerings. This leads to higher recruitment and training costs, imposing a significant financial strain on small businesses.

By partnering with a PEO, businesses can help reduce these expenses and gain access to more favorable health insurance rates and comprehensive solutions.

How PEOs Help Manage Compliance

Navigating federal and state regulations can be challenging, especially for small businesses. Professional Employer Organizations (PEOs) provide essential support to ensure compliance with various regulations, including the Affordable Care Act (ACA), COBRA, and ERISA.

Affordable Care Act (ACA) Compliance:

• PEOs help businesses meet ACA requirements by managing health insurance plans that comply with ACA standards.
• They help ensure health benefits meet the minimum essential coverage criteria and are affordable for employees.
• PEOs track employee hours to help determine ACA eligibility, reducing the risk of non-compliance penalties.

COBRA Administration:

• PEOs handle COBRA compliance by managing notifications, enrollment, and premium payments for eligible employees who leave the company. 
• They help ensure that former employees can continue their health coverage seamlessly, maintaining compliance with federal regulations.

ERISA Oversight:

• PEOs oversee employee benefit plans, including health insurance and retirement plans, helping to ensure they meet ERISA’s regulatory requirements.
• They manage plan documentation, reporting, and compliance audits, helping to prevent potential legal issues and ensuring correct benefits administration.

By managing these compliance tasks, PEOs reduce the administrative burden on small business owners. They provide expert guidance and support, minimizing the risk of penalties and legal disputes.

This proactive approach allows business owners to focus on their core activities, knowing their HR functions and employee benefits are well-managed.

Why FrankCrum?

When it comes to managing your business’s HR functions and employee benefits, choosing the right Professional Employer Organization (PEO) is crucial. At FrankCrum, we offer unparalleled expertise and comprehensive solutions that set us apart in the industry.

We provide a wide range of employee benefits, including competitive health insurance plans, retirement options, and wellness programs. By leveraging our large network, we secure better rates and more comprehensive coverage than what you might find on your own. We are committed to providing the highest level of service and support, helping your business thrive in today’s competitive environment. Get started today with a custom quote and learn how we can tailor our solutions to meet your unique needs and drive your business forward.