| After pay, health insurance is the most important | | | | connect with an expert PEO in the state. |
| inducement small businesses use to recruit and keep | | | | Most PEOs create a "co-employment" relationship with |
| employees motivated. Yet many employers are finding | | | | their clients, thereby sharing the risks and responsibilities |
| the ability to provide cost effective health insurance | | | | of being an employer. The PEO assumes the role of |
| more challenging as premiums continue to rise and the | | | | the Administrative Employer, whereby it pays the |
| options available continue to decrease. Employers are | | | | employees, files payroll taxes, provides health |
| beginning to think "out of the box" and are looking at | | | | insurance, issues the workers' compensation insurance, |
| new ways to offer their employees benefit programs, | | | | and manages most aspects of employment. The client |
| and to keep them motivated. | | | | maintains the role as the Administrative Employer and |
| NAPEO, the National Association of Professional | | | | continues to manage and oversee all day-to-day |
| Employer Organizations, conducted an employee | | | | functions relating to their internal operations. This |
| benefits survey in November, 2007 of its members' | | | | includes hiring, firing, establishing wages, and directing |
| clients to understand the concerns of small and | | | | the workforce. |
| medium-sized employers. NAPEO is an organization | | | | Through this co-employment relationship, small |
| that represents firms, PEOs, which specialize in | | | | organizations access the economies of scale enjoyed |
| providing human resources outsourcing support and | | | | by large corporations. PEO clients can offer premium |
| employee benefit packages to small and mid-sized | | | | benefit packages and retirement plans to their staff, |
| employers nationwide. Mirroring the sentiment across | | | | typically provided by their larger competitors. They can |
| the country, the trade association found that health | | | | maintain a simple in-house HR infrastructure or none at |
| care costs were their second-biggest worry after | | | | all by relying on the PEO. The client also can reduce |
| attracting workers. | | | | hiring overhead. Costs related to monitoring of, and |
| The survey also revealed that more than half of the | | | | compliance with, employment laws are reduced, as |
| 365 small businesses surveyed said their premiums | | | | are the often significant costs of failure to comply with |
| rose as much as 10 percent this year, and almost one | | | | such laws. In addition, the PEO provides time savings |
| in 10 told NAPEO they would dump their health | | | | by handling routine and redundant tasks for its clients. |
| coverage next year or are unsure about it. Many of | | | | This enables the business owner to focus on the |
| these companies said they will pass at least some | | | | company's core competency and grow its bottom line. |
| costs along to employees next year. One in five said | | | | Creative and Affordable Insurance Options |
| they would raise co-payments for office visits or | | | | According to NAPEO, the PEO industry grew over |
| deductibles; one in four said they'd raise premiums. | | | | 15% in 2007, to $61 billion in gross revenues. PEOs |
| California Employers Feel The Squeeze | | | | currently provide access to employee benefits for 2-3 |
| The survey was conducted nationally, but employers in | | | | million working Americans. This number continues to |
| specific states, such as California, are being hit the | | | | grow as the economies of scale offered by PEOs |
| hardest. Michael Holmes, Client Services Director of | | | | make them an attractive solution for small employers |
| CPEhr, a Los Angeles-based Professional Employer | | | | looking to offer a wider range of benefits to their staff, |
| Organization, is not surprised. "This is another wake-up | | | | without the need to shop, administer or oversee these |
| call," says Holmes. "Soaring health insurance costs in | | | | plans. |
| California are hitting small businesses especially hard | | | | PEOs maintain a fully staffed employee benefits |
| and these businesses employ the vast majority of | | | | department which is focused on finding cost effective |
| workers. This is an extremely troubling development, | | | | and comprehensive benefits to make available to its |
| not just for small businesses and their workers, but for | | | | clients. Because PEOs have the manpower to tackle |
| the entire economy." | | | | this daunting task, the small employer merely has to |
| A report recently released by the California State | | | | join the PEO program, and enjoy access to the |
| Library, entitled, "Ninety Years of Health Insurance | | | | benefits without the responsibility to administer the |
| Reform Efforts in California" by Michael Dimmitt, Ph.D | | | | plans. |
| of the California Research Bureau, reviews the history | | | | Like most employers, the PEO offers its clients |
| of health insurance in California dating back to 1918. It | | | | standard major medical insurances with the large |
| reveals some startling facts, and reasons for even | | | | insurance carriers. However, due to the size of the |
| greater concern in California: | | | | pool of employees, PEOs enjoy a stronger relationship |
| " Between 1961 and 2002, health care costs increased | | | | with the insurance companies which enables them to |
| almost without interruption. No effort to contain them | | | | offer a wider range of plans and coverage options, |
| has proven successful over the long term. | | | | with greater flexibility on enrollments and improved |
| " Federal programs provide health care coverage to | | | | customer service. While a small business independently |
| over 7.4 million Californians. If the programs were not in | | | | may secure a benefit plan with one or two co-pay |
| place, the number of uninsured in the state would | | | | options, a PEO offers as many as 8-10 options for the |
| double. | | | | same employer. |
| " More than 20 percent of Californians, 6.6 million | | | | In addition to major medical, a wide range of |
| people, currently lack health care coverage over the | | | | supplemental benefits, such as dental, vision, life, and |
| course of the year according to research conducted | | | | disability insurances are available. CPEhr also extends |
| for the California Healthcare Foundation. | | | | its benefit offering to include additional employee |
| " Of those without health insurance, an estimated 75 | | | | programs such as such as travel, cancer and |
| percent are working people and their families. | | | | alternative health care insurances, credit unions, Flexible |
| " As a consequence of the growth in premiums, the | | | | Spending Accounts, and robust 401 (k) plans. The |
| number of people covered by health insurance in | | | | Small Business Administration estimates that merely |
| California decreased from 64.6 percent to 54.7 | | | | nineteen percent of employees working in a small |
| percent between 1987 and 2005. | | | | business have access to a 401 (k). That number |
| Some employers are content to continue along the | | | | skyrockets to an estimated 95% in a PEO |
| traditional health coverage path for their staff. While | | | | arrangement. |
| premiums rise, most just consider it a cost of doing | | | | While it is obvious that not every small business will |
| business. However, many California employers are | | | | need, or even want, to offer this wide range of |
| now turning to the PEOs to provide relief for their | | | | benefits to its staff, it should be comforting for them to |
| employee insurance woes. | | | | know that alternatives exist. At the least, the small |
| What is a Professional Employer Organization? | | | | employer should recognize the extraordinary |
| Professional employer organizations, or PEOs, pool | | | | opportunity PEOs offer to help level the playing field in |
| thousands of employees under one roof and provide | | | | the complex and tough employee benefits |
| cost effective management of small employers' health | | | | environment. |
| insurance plans. Additionally, PEOs help small | | | | Conclusion |
| businesses outsource their time-consuming human | | | | Rising health insurance premiums, complex |
| resources chores, such as payroll, HR policies and risk | | | | employment and benefit administration, and a weak |
| management, so owners can focus on making a profit. | | | | economy are all making the task of procuring |
| The PEO acts like an offsite human resource | | | | affordable, manageable health insurance more daunting |
| department, so even small employers can gain access | | | | for the typical small employer. Particularly in California, |
| to expertise typically reserved for larger, more | | | | where 75% of the uninsured population is in the |
| established organizations. Particularly in California, | | | | workforce, these challenges are reaching critical limits. |
| where complex employment rules and difficult | | | | More and more employers are turning towards |
| insurance guidelines weigh heavily on small businesses, | | | | alternative health insurance solutions, such as joining a |
| it is highly beneficial for small California employers to | | | | PEO for their employee benefit coverages. |