| One of the biggest employer
gripes is the steep hike in benefits rates. The Kaiser Family Foundation
survey of benefits rates shows annual premium increases of around 18 per
cent, higher in some states. And if your age and employee number demographics
change significantly, those increases can hit up to 40 per cent. How does
a PEO help with benefits costs?
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A PEO can use its buying power on behalf of all its client employees
to secure better rates for health, dental and vision insurances. It can
also offer plans that a small employer may not or cannot offer on its
own, such as a 401k, a Flexible Spending Plan (also known as a Section
125 or cafeteria plan) and life and long/short term disability insurance.
It manages all the administration of the plans which can be draining on
a small business. It also keeps up to date with legislation such as HIPAA
laws which concern the privacy of employee health information.
Even though the PEO will offer benefits at advantageous rates, make sure
that you still check out the plan details. Depending on the market segment
of the PEO, you'll find that the policy is geared at a broad sweep of
employers or maybe towards the top end for high tech or bottom end for
blue collar clients. Look for the level of deductibles and copays. Also
check whether the rates are age-rated or not, and whether that is significant
for your company demographics. If you have a young workforce, age-rated
premiums could actually work out cheaper.
Check also how flexible a PEO can be on allowing you to pick and choose
which benefits you offer. Others require you to fund the full range.
Most employers these days require the employee to make some contribution
to the monthly premiums. Your PEO can advise you on what is the norm in
your business sector, and the PEO should allow you to specify how much
of the premium the employee pays.
Note though that the insurance companies have their own requirements
for a company to qualify for a group policy. The employer is usually required
to fund at least 50 per cent of the employee's premium, although there
is not usually a minimum for dependent contributions.
The carrier will also require an employee to take the group insurance
or waive only because they are covered by a spouse's company policy. So
you do not want to make it too arduous for an employee to take up your
insurance, or else a benefit can quickly turn into a burden.
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