PEO
Small-Business Owners Want Benefits Help but Struggle With the Cost
By Anthony Beck, . Insurance Wire.
Approximately two-thirds of small-business owners are seeking outside assistance to offer employee benefits, according to survey findings reported by Employee Benefit News.
Rising insurance premiums, limited budgets and the administrative demands of managing benefits are among the challenges facing these employers.
The findings suggest demand for outside support, but do not establish how many businesses are considering a Professional Employer Organization (PEO), benefits broker or another arrangement.
The reported survey results also do not specify which benefits employers struggle most to maintain or how many have discontinued coverage because of cost.
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Why Benefits Are Difficult for Small Employers
Small businesses generally have fewer employees over whom to spread the fixed costs of benefits administration. They also have less capacity to dedicate staff to evaluating insurance plans, managing enrollment, processing eligibility changes and addressing compliance requirements.
Health insurance costs create a separate challenge.
Unlike larger employers that may have access to additional funding arrangements or more negotiating leverage, small employers often purchase coverage through the fully insured small-group market.
Under the Affordable Care Act, premiums for non-grandfathered small-group health insurance are subject to modified community-rating rules. Insurers generally cannot set premiums based on an individual employer's claims experience or employees' health status. Permitted rating factors include age, geographic area, tobacco use and family composition, subject to applicable limits.
Consequently, simply having a healthier workforce does not necessarily produce lower small-group premiums.
Employers must also decide how much of the premium they can contribute and how much employees can reasonably afford through payroll deductions.
For businesses operating on limited margins, an increase in employer contributions can make maintaining coverage difficult even when the underlying insurance plan remains unchanged.
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Where PEOs Can Help
A PEO can provide access to employee benefits through a co-employment arrangement while also handling payroll, benefits administration and other HR functions.
Depending on the PEO, employees may participate in a larger group health plan or another insurance arrangement administered through the PEO.
This can give smaller employers access to benefit options, administrative resources and potentially different pricing than they would obtain independently.
However, joining a PEO does not automatically guarantee lower health insurance premiums.
Pricing depends on the PEO's insurance structure, carrier agreements, underwriting methodology where permitted, employee demographics, participation requirements and employer contributions.
A PEO's administrative fees must also be considered when evaluating total costs.
For example, a business could reduce its health insurance premiums through a PEO while paying additional service fees that offset part or all of those savings.
The appropriate comparison is the employer's total cost of benefits, payroll administration and related services under each arrangement, not health insurance premiums alone.
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What Benefits Brokers Can Offer
A benefits broker can help employers compare available plans, evaluate employer contribution strategies and manage renewals without requiring a co-employment relationship.
For smaller employers, that assistance can include reviewing carrier options, comparing deductibles and out-of-pocket maximums, evaluating employee contributions and identifying alternative plan designs.
Broker compensation also varies. Many brokers receive commissions included in insurance premiums, while others charge consulting fees or use a combination of compensation methods.
That distinction matters when assessing whether an employer can afford outside assistance.
An employer seeking help with health insurance costs may not need to change its payroll provider or enter a PEO arrangement. A broker may be able to address the immediate issue through the existing benefits structure.
Conversely, an employer struggling with payroll administration, HR compliance and benefits management may find that a PEO addresses several operational needs together.
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What the Survey Means for PEOs and Brokers
The Employee Benefit News findings identify demand for benefits assistance, but they do not establish what employers are willing to pay for that assistance or which service model they prefer.
For brokers, affordability should be evaluated alongside coverage quality. A lower-premium plan may reduce employer costs but increase employee deductibles, out-of-pocket exposure or payroll contributions.
For PEOs, the relevant comparison extends beyond insurance. Employers need to understand the PEO's administrative fees, available benefits, payroll services, workers' compensation arrangements and the responsibilities assigned through co-employment.
The survey also does not establish that small-business owners understand the PEO model or are actively seeking co-employment.
That limits what can be concluded about potential PEO adoption from the reported results.
The clearest finding is that many small employers want help maintaining employee benefits while managing costs. Whether a broker, PEO or another arrangement provides the better solution depends on the employer's existing coverage, workforce, administrative needs and total expenses.
Source: https://www.benefitnews.com/news/small-Businesses-Struggle-With-Rising-Benefit-Costs
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