After pay, health insurance has become the most essential inducement small businesses use to recruit and keep employees motivated. However, many employers are finding the ability to supply cost-effective health insurance harder as premiums continue to rise and the options available are still decreasing. Employers have started to think”out of the box” and are taking a look at new ways to provide their worker’s benefit programs and keep them inspired.
NAPEO, the National Association of Professional Employer Organizations, conducted an employee benefits survey in November 2007 of its own members’ customers to comprehend the issues of small and midsize companies. NAPEO is an organization that reflects firms, PEOs, which concentrate on providing human resources outsourcing service and worker benefit packages to small and midsize employers nationally. Mirroring the sentiment throughout the nation, the trade association found that health care costs have been their second-biggest worry after bringing employees.
The poll also revealed that more than half the 365 small businesses surveyed reported their premiums climbed up to 10 percent annually, and almost one in 10 advised NAPEO they’d dump their health policy annually or two are uncertain about it. A number of these firms said they will pass at least some costs along to employees next year. One in five said they’d raise co-payments for office visits or deductibles; one in four said they would raise premiums.
California Employers Feel The Squeeze
The poll was conducted nationally, but employers in particular states, such as California, are being hit the hardest. Michael Holmes, Client Services Director of CPEhr, a Los Angeles-based Professional Employer Organization, isn’t surprised. “This is just another wake-up call,” says Holmes. “Soaring health insurance prices in California are hitting small businesses particularly hard and these businesses use the vast majority of workers. This is a very troubling development, not just for small businesses and their workers, but for the whole economy.” Find out more here!
A report recently published by the California State Library, entitled, “Ninety Years of Health Insurance Reform Efforts in California” by Michael Dimmitt, Ph.D. of the California Research Bureau, reviews the history of health insurance in California dating back to 1918. It shows some startling facts and reasons for much greater concern in California:
” Between 1961 and 2002, health care prices increased almost without disturbance. No attempt to contain them has proven effective over the long run.
” Federal programs provide health care coverage to over 7.4 million Californians. If the programs weren’t in place, the number of uninsured in the state would doublecheck.
” Over 20 percent of Californians, 6.6 million people, now lack health care coverage within the course of this year according to research conducted for the California Healthcare Foundation.
” Of those without health insurance, an estimated 75 percent are working individuals and their families.
” As a result of the increase in premiums, the number of people covered by health insurance in California decreased from 64.6 percent to 54.7 percent between 1987 and 2005.
Some employers are pleased to continue along the conventional health care path for their staff. While premiums increase, most simply consider it a cost of doing business. However, several California companies are now turning to the PEOs to provide relief for their worker insurance woes.
What is a Professional Employer Organization?
Professional employer organizations, or PEOs, pool thousands of workers under one roof and provide cost-effective management of small companies’ health insurance programs. Additionally, PEOs help small businesses outsource their time consuming individual resources chores, such as payroll, HR policies and risk management, so owners can concentrate on making a profit. The PEO acts like an offsite human resource department, so even tiny employers can obtain access to experience typically reserved for larger, more established organizations. Especially in California, where complex labor rules and hard insurance policies weigh heavily on small businesses, it is highly beneficial for small California companies to connect with a specialist PEO in the nation.
Many PEOs make a”co-employment” connection with their clients, thereby sharing the dangers and obligations of being an employer. The PEO assumes the role of the Administrative Companion, where it pays the workers, files payroll taxes, supplies health insurance, issues the employees’ compensation insurance, and manages most aspects of employment. The customer maintains the function as Administrative Employer and proceeds to manage and oversee all daily functions concerning their internal operations. This includes hiring, firing, demonstrating wages, and directing the workforce.
By means of this co-employment connection, small organizations get the economies of scale enjoyed by large corporations. PEO Canada clients can offer top-notch benefit packages and retirement plans to their employees, typically provided with their bigger competitors. They could maintain an easy in-house HR infrastructure or none whatsoever by relying on the PEO. The client also can decrease hiring overhead. Costs related to monitoring of, and compliance with, employment laws are decreased, as are the often significant costs of failing to comply with such legislation. In addition, the PEO provides time savings by managing routine and redundant jobs for its clients. This allows the business owner to concentrate on the company’s core competency and grow its bottom line.
Creative and Inexpensive Insurance Choices
Based on NAPEO, the PEO industry grew over 15 percent in 2007, to $61 billion in gross revenues. PEOs now offer access to employee benefits for 2-3 million Americans. This number continues to grow as the economies of scale offered by PEOs make them an attractive solution for smaller companies seeking to supply a wider variety of benefits to their employees, without needing to store, administer or oversee these programs.
PEOs keep a fully staffed employee benefits department that’s focused on locating cost-effective and comprehensive benefits to make accessible to its clientele. Since PEOs have the manpower to handle this daunting task, the small company only has to combine the PEO program and enjoy access to the benefits without the responsibility to administer the plans.
Like many companies, the PEO provides its clients standard major health insurances with the huge insurance carriers. However, because of the size of this pool of employees, PEOs enjoy a stronger relationship with the insurance companies which enables them to provide a wider range of plans and coverage options, with increased efficacy on enrollments and improved customer service. Even though a little business independently may secure a benefit program with a couple of co-pay options, a PEO provides as many as 8-10 options for the same employer.
Along with important medical, a wide range of supplementary benefits, such as dental, vision, life, and disability insurances are accessible. CPEhr also extends its benefit offering to include additional employee programs such as such as travel, cancer and other health care programs, credit unions, Flexible Spending Accounts, and powerful 401 (k) plans. The Small Business Administration estimates that merely nineteen percent of employees working in a small business have access to a 401 (k). That amount skyrockets to an estimated 95 percent in a PEO arrangement.
Although it’s clear that not every small business will need, or even want, to offer this broad range of benefits to its own staff, it should be comforting for them to know that alternatives exist. At the least, the small company ought to recognize the outstanding opportunity PEOs provide to help level the playing area in the complicated and tough employee benefits environment.
Growing health insurance premiums, complex employment and benefits management, and a poor economy are making the job of procuring affordable, manageable health insurance more daunting for the typical small employer. Especially in California, where 75% of the uninsured population is in the workforce, these challenges are reaching critical limitations. A growing number of companies are turning towards other health insurance solutions, such as linking a PEO for their employee benefit coverages.