PEO Health Insurance vs. Broker

Most employers understand how important it is to include health coverage in their employee benefits packages – even when they’re not legally required to do so. Health insurance essentially is table stakes for attracting and retaining top talent. Employees value health insurance more than higher pay and expect employers to provide it, especially now, when jobs are plentiful and the people available to fill them are few. 

The law expects it, too, when companies reach a certain size. Under the Affordable Care Act, any organization that employs 50 or more people (including full-time equivalent employees for 120 days or fewer during the calendar year) and does not offer health insurance will be heavily penalized. 

RELATED: What Changes When Your Business Reaches 50 Employees >>

Whether you are legally bound or just choose to offer health care benefits, getting the right balance of options and costs can be a heavy lift.

Small and mid-sized businesses take different approaches to finding and administering their health insurance plans. Very few try to do it themselves – even if they have an internal HR team – because they understand that the process of comparing health insurance options and administering benefits is complex and time-consuming.

There’s a steep learning curve for anyone who isn’t well-versed in the intricacies of finding, choosing and managing health insurance benefits. 

RELATED: Small Businesses, Health Insurance and the PEO Option >>

Since handling the process strategically and efficiently requires in-depth procedural knowledge and specific HR expertise, many small and mid-sized companies in Kansas, Missouri and the Kansas City metro turn to an insurance broker or a professional employer organization (PEO) like Axcet HR Solutions for help. If you’re considering outsourcing your health benefits administration, you should know there are distinct differences between these two types of external partners. 

PEO Health Insurance vs. Insurance Broker: Pros & Cons

On the front side, a PEO and insurance broker both guide you through the process of selecting health insurance plans and enrolling your employees. But their similarities end after enrollment is completed. Here are the pros and cons of each:

Insurance Broker

   Pros

• Understands the available plans, carriers and legal requirements and use their knowledge of the health care market to evaluate which options are a good fit for your organization. 
  
  
• Works with insurance companies on your behalf and represents your business's best interests, not the insurers'
  
  
• Identifying and evaluating health insurance options and the associated costs; 
  
  
• Recommending the ones that best meet your company’s and your employees’ needs and budget; 
  
  
• Providing assistance in educating your employees about the plan designs and associated costs available to them; and 
  
  
• Signing them up for the ones they choose. 

   Cons

• Take a back seat after enrollment, placing the burden of administering health benefits squarely back on the small company’s shoulders.

• Continue benefiting financially every time the business and its employees pay a monthly premium even though they no longer do any work for the business or its employees. That’s because brokers work on commission, meaning insurance carriers pay them a portion of the premium a company and its workers pay each month. As long as a small business has a plan a broker helped secure, the broker gets paid even though no services are provided beyond the initial setup.   

PEO

   Pros

• Understands the available plans, carriers and legal requirements and use their knowledge of the health care market to evaluate which options are a good fit for your organization. 
  
  
• Works with insurance companies on your behalf and represents your business's best interests, not the insurers'
  
  
• Identifying and evaluating health insurance options and the associated costs; 
  
  
• Recommending the ones that best meet your company’s and your employees’ needs and budget; 
  
  
• Providing assistance in educating your employees about the plan designs and associated costs available to them; and 
  
  
• Signing them up for the ones they choose. 
  

  Additionally, PEOs provide these pros:

  • Access to affordable, Fortune 500-level employee benefits.
  • There with you, your company and its employees for the duration.
  • Provides every client with a dedicated HR benefits consultant who navigates health insurance minefields, ensures your company is always legally compliant, and manages all of the paperwork.
  • Relieves you of every headache related to ongoing plan administration. 
  • Paid through an administration fee, often based on a percentage of a client’s total payroll or a flat fee per employee. The fee is not tied specifically to clients’ insurance premiums, as brokers' are. With the fee, employers typically receive a full suite of expert services, including comprehensive human resources, payroll administration, workplace safety consulting, risk management support and compliance, in addition to optional employee benefits and total benefits administration. 

PEO Benefits: A Deep Dive

For most Kansas, Missouri and Kansas City companies, especially smaller ones that could never afford highly competitive plans on their own or with a broker, it’s more advantageous to work with a PEO for employee health benefits for several important reasons. 

• Affordable, Fortune 500-level coverage 

Through a model called co-employment, PEOs can include their small and mid-sized clients’ workers in a single, employee group. Co-employment is essentially just a contractual agreement that allocates certain employer responsibilities – like benefits administration – to a PEO. The PEO’s client – the small or mid-sized business – maintains direction and control over all business decisions and operations. 

The advantage of co-employment, which is unique to PEOs, is that it creates a larger group and more buying power with insurance carriers than a small business could get on its own – or that an insurance broker would have working on behalf of an individual small business.  

RELATED: Should Your Small Business Offer Health Insurance? >>

Carriers view smaller companies and their smaller employee groups as higher risk. They price their premiums higher to cover that small group risk. But when a company partners with a PEO, it can become part of the thousands of employees that make up the PEO’s large group. That’s how a PEO can offer more desirable, yet affordable, health care options – options to which brokers do not have access. It’s simple math – the smaller the group, the higher the risk and the higher the premiums.

Conversely, the larger the group, the more health care amenities available, the higher the discounts and the lower the costs for each small company that participates in the PEO’s plan. 

So, a PEO enables small businesses to leverage group plan pricing and offer their employees the same kinds of high-quality benefits typically only available at larger Fortune 500 corporations – coverage their employees will understand, value and use and which they almost certainly could not afford otherwise. That helps level the playing field for smaller employers, allowing them to make more competitive job offers that attract and retain highly qualified talent. 

• Ongoing, personalized expert support 

After enrollment, an insurance broker provides very little to no additional services to its small business customers until it’s time to start the annual health insurance evaluation process for the next year. A PEO, on the other hand, provides extensive, ongoing support and personalized employee benefit plan services. Considering that there’s still a lot to do between annual renewal periods, smaller companies get a lot more for their money with a PEO. 

Employee benefit plan administration is a daunting and critical task. The demand for attention is constant. Answering employees’ questions, addressing challenges with claims and other ongoing to-do list items can be an almost-daily requirement. A PEO will handle every one of them quickly and expertly, without a business owner having to worry about anything.

PEO benefits administration includes: 

• • Setting up automatic paycheck deductions for premium payments; 
  • Collecting and submitting premiums to the insurance provider, always meeting premium payment deadlines and ensuring that correct payments are made 
  • Paying claims and other bills; 
  • Working directly with employees as needed to help resolve claims; 
  • Handling changes in employees’ status, such as marriage or divorce, a spouse’s death, a child’s birth or a change in residence;  
  • Determining benefits eligibility for new hires; 
  • Working with eligible new employees to make sure they understand their benefits options and adding them to their preferred plans; 
  • Adjusting the amount owed and paid to the insurance provider if an employee leaves the client company; and 
  • Balancing, reconciling and reviewing employer accounts to ensure accuracy. 

A PEO like Axcet delivers specialized, personalized expertise that alleviates the heavy administrative burden employee benefits represent, saving client companies countless hours and major inconveniences and headaches. 

• Benefits plan compliance 

Small businesses in Missouri, Kansas and Kansas City – as in every state – are obligated to meet federal and state legal requirements for health benefit plans. Mishandled, employers could create disgruntled, disengaged employees and face significant government non-compliance penalties. 

These requirements also are revised frequently, which challenges smaller companies to stay aware of, let alone comply with, ever-changing regulations. Under a co-employment agreement with a PEO, however, maintaining compliance becomes the responsibility of the PEO – one more burden off the small to mid-sized business owner’s mind and perpetually growing task list. 

RELATED: Avoid Making the Nine Most Common Employee Benefits Mistakes >>

How Axcet HR Solutions Can Help with PEO Insurance

If you’re ready to relieve the stress that comes with providing employee health insurance benefits and stop worrying about annual renewal negotiations, benefits plan administration, legal regulations and other health insurance complexities, schedule your free consultation with Axcet today. We are the oldest Kansas City-based PEO, with employee benefits experts who can help you navigate from beginning to end the process of providing benefits your employees will appreciate and use while giving back time you can allocate to focus on growing your business.