A PEO (professional employer organization) is a program that allows a small business to wrap up payroll, benefits, workers comp, compliance, tax reporting and HR support all under one roof. Key benefits include:
- consolidation of all those functions with one provider
- access to large group health benefits from one or multiple insurers
- health plan rate and plan design stability
- a more robust offering of ancillary benefits beyond any small group offering
- flexible spending, health savings accounts, and retirement plan offerings
- better workers compensation underwriting
- tax reporting that’s accurate
- W-2 distribution
- ability to recruit employees from larger competitors
- retention of employees to keep hiring and training costs down
PEO’s have continually grown market share over the last 10 years but still are not top of mind for many employers. The key reason is that many of the large PEO’s have avoided engaging the traditional employee benefits broker channel and have gone to market with their own salesforces. And these same sales teams have taken business away from the broker market, not making friends in the process. Therefore, while a PEO might be the best strategy for a small employer, their incumbent broker relationship won’t promote it especially if they lose commission revenue vs. the traditional model.
Some of the largest PEO’s have begun broker strategies, but still lack the penetration to accelerate growth. The next 10 years will be interesting as the PEO market leans into traditional brokers.
So, is a PEO for you? The answer is why not? From my perspective with 20 years of benefits experience, it’s kind of a no brainer. Even if there’s no money to be saved, the risk/reward is high for many of the benefits outlined above.
I see the biggest challenge is that aside from the lack of enthusiasm by an incumbent broker, it’s just the “pain” of change. And while it’ll take 4 weeks of implementation, the smooth sailing that goes beyond that transition will outweigh any short-term stress.
A more effective staff, less paperwork, easy employee onboarding, and the ability to offer your employees a program that is way beyond your current offering.
About CLEAR Healthcare Solutions
CLEAR Healthcare Solutions is a consulting firm specializing in medical practice improvement, employee benefit strategy, point solution go-to-market strategy, expense reduction, and healthcare and insurance education. The company leverages over two decades of industry relationships and expertise to bring fresh perspectives to healthcare and business challenges.
About The CLEARly Beneficial Podcast
The CLEARly Beneficial podcast rips off the band-aid on healthcare and explores the future of benefits with industry innovators. Whether you’re an insurance broker, HR professional, employer, or engaged professional, the podcast delivers straight talk and actionable insights from someone with decades in the trenches. The show takes a solution-oriented approach, featuring conversations with healthcare CEOs, authors, innovators, and leaders driving positive change across industries.
New episodes are released weekly on all major podcast platforms.
For more information, visit www.clearhcs.com or connect with Vinny Catalano on LinkedIn at www.linkedin.com/in/vcatalano.
Disclaimer: This content is for educational purposes only. Please discuss your specific situation with your health benefits administrator or insurance provider for personalized guidance.