Before the days of PEO Insurance, employers faced a dilemma when it came to medical insurance. Keeping costs low boosts profits, but skimping on medical insurance results in employee dissatisfaction and higher staff turnover. Employee turnover incurs costs, as you now have to recruit new talent. That leads to enduring the learning curve new employees go through as they become accustomed to a new job. Now, employers can avoid this issue by working with a PEO to get PEO Insurance.
Can PEO insurance make the difference you are looking for?
Why are Your Insurance Costs so High?
We all know the saying “Buy in bulk and save!” We see it almost every time we go to the supermarket to get household necessities. The bigger the pack, the less you pay for the product itself. Coincidentally, medical insurance companies work in much the same way. It makes sense. Every client they handle means more admin and higher costs, and somebody has to cover them.
Therefore, if you have twenty employees, you end up paying more for fewer benefits (per employee) than someone getting medical insurance for a few hundred employees. For the insurance company, the economy of scale and the lure of landing a big client allows it to charge less per insured person. The insurance companies are able to spread the risk of loss over a larger amount of users, allowing them to spread the costs of the premiums over a larger number of users.
Does That Mean Only the Big Guys Win?
If you are running a small or medium-sized firm, you would likely see yourself at a disadvantage when it comes to medical insurance buying power. You may be out there competing against huge corporates and multinational companies. Your competitive edge is being affected by the sum you have to pay for medical insurance.
However, in today’s world, working with a PEO is one way in which a well-informed small business can realize the same savings as the biggest companies. These businesses leverage the experience and economies of scale of a provider that’s set up to specifically help small firms. Furthermore, there are some other strategies that you can try, but the cost savings are less noticeable. Let’s take a look at all of them so that you can examine your options.
PEO Insurance Gets Your Company the Best Deals
A PEO, or Professional Employer Organization, acts as the formal co-employer of all your staff. There are several cost-saving benefits to choosing this route, but is one of the most significant savings you will realize.
Here’s how it works. You remain “the boss”. However, your PEO handles the HR side of things on your behalf, and that includes getting medical insurance. Because PEOs handle HR and insurance for several companies, they have a big pool of staff to insure. Insurance companies want their business and offer much better rates than you would be able to secure on your own. An important thing to remember about PEO insurance is that you not only get better prices but you often get better quality of those insurance benefits.
The bottom line? You get “big guy” benefits without having to employ hundreds of staff members.
Other Medical Insurance Savings Strategies
Get as many quotes as you can
Shopping around is a time-honored way of saving costs. Contact as many insurance companies as you can and compare costs and benefits. An insurance broker can help you with this process.
However, you should check how many options your broker is looking at, and you should also follow up how much commission you might be paying. If your broker is working on a percentage of insurance commission, he or she has a conflict of interest that may not be in your best interests.
Choose insurance that integrates with a wellness program and get your staff on board
Some insurance companies are willing to offer reduced rates if you can prove that you are helping your employees to stay well. This would mean offering workplace help on such issues as healthy diet and possibly even giving your staff time off for regular workouts. Unfortunately, some employees might see this as being paternalistic.
Checking Out Your Options
While we encourage you to check out all your options, we are confident that the benefits of using PEO insurance plan coupled with the additional services a PEO will render, will save you more than any other strategy. How will you know which PEO will offer your business the best benefits? Just jumping at the first option to come your way might not be the best solution to optimize your health insurance benefits. In addition, you may not know the history the PEO has had with managing their costs for their clients. If they have a bad claims experience then the renewals for the Insurance premiums may look great when you join. However, the second year you are with the PEO, these costs could skyrocket more than 20%.