After cover, health insurance has become the most essential inducement small businesses use to recruit and keep employees motivated. However, many employers are finding the capability to supply cost-effective health insurance more challenging as premiums continue to grow and the choices available continue to decrease. Employers have started to think”out of the box” and are looking at new ways to offer their employees benefit programs and keep them inspired.
NAPEO, the National Association of Professional Employer Organizations, conducted an employee benefits survey in November 2007 of its members’ clients to comprehend the concerns of small and medium-sized employers. NAPEO is an organization that reflects companies, PEOs, which specialize in providing human resources outsourcing service and worker benefit packages to small and midsize employers nationally. Mirroring the sentiment throughout the country, the trade association found that health care costs have been their second-biggest worry after bringing employees.
The survey also revealed that more than half the 365 small businesses surveyed reported their premiums rose as much as 10 percent annually, and nearly one in 10 told NAPEO they’d dump their health policy next year or are unsure about it. Many of these companies said they’ll pass at some costs along to workers next year. One in five said they would raise co-payments for office visits or deductibles; one in four said they’d raise premiums. PEO Canada: Outsourcing in HR & Outsource Employer Services
California Employers Feel The Squeeze
The survey was conducted nationwide, but companies in particular countries, such as California, have been hit the hardest. Michael Holmes, Client Services Director of CPEhr, a Los Angeles-based Professional Employer Organization, is not surprised. “This is another wake-up telephone,” says Holmes. “Soaring health insurance costs in California are hitting small businesses particularly challenging and these businesses use the huge majority of workers. This is an extremely troubling development, not just for small businesses and their workers, but for the whole economy.”
A report recently published by the California State Library, qualified,”Ninety Decades 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 motives for even greater concern in California:
” Between 1961 and 2002, health care costs increased almost without disturbance. No attempt to contain them has proven effective over the long term.
” Federal plans provide health care coverage to over 7.4 million Californians. If the programs weren’t in position, the amount of uninsured in the state would double.
” More than 20% of Californians, 6.6 million people, currently lack health care coverage within the course of the year according to study conducted for the California Healthcare Foundation.
” Of those without health insurance, an estimated 75 percent are working people and their families.
” As a consequence of the increase in premiums, the number of individuals covered by health insurance in California decreased from 64.6% to 54.7 percent between 1987 and 2005.
Some employers are pleased to continue together the conventional health care path for their staff. While premiums rise, most just consider it a cost of doing business. However, many California employers are now turning to the PEOs to provide relief for their employee insurance woes.
What is a Professional Employer Organization?
Professional employer associations, or PEOsand pool tens of tens of thousands of employees under one roof and supply cost-effective direction of small employers’ health insurance plans. Furthermore, PEOs help small businesses outsource their time consuming human resources chores, such as payroll, HR policies and risk management, so owners can focus on earning a profit. The PEO Canada behaves like an offsite human resource section, therefore even small employers can obtain access to experience typically reserved for larger, more established organizations. Especially in California, where complicated labor rules and difficult insurance guidelines weigh heavily on small businesses, it’s highly beneficial for little California companies to connect with a specialist PEO from the state.
Many PEOs create a”co-employment” connection with their clients, thus sharing the dangers and obligations of being a company. The PEO assumes the part of the Administrative Employer, whereby it pays the workers, files payroll taxes, supplies health insurance, problems the employees’ compensation insurance, and oversees most aspects of the job. The customer maintains the function as Administrative Employer and proceeds to handle and oversee all day-to-day functions concerning their internal operations. This includes hiring, firing, demonstrating wages, and directing the workforce.
Through this co-employment relationship, small organizations access the markets of scale enjoyed by large businesses. PEO clients can offer premium benefit packages and retirement plans to their employees, typically provided with their bigger competitors. They can maintain a simple in-house HR infrastructure or none at all by relying upon the PEO. The customer also can decrease hiring overhead. Costs associated with monitoring of, and compliance with, labor legislation are decreased, as would be 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 customers. This enables the business owner to concentrate on the company’s core competency and expand its bottom line.
Creative and Affordable Insurance Choices
According to NAPEO, the PEO industry grew over 15 percent in 2007, to $61 billion in gross earnings. PEOs now provide access to employee benefits for 2-3 million working Americans. This number continues to rise as the economies of scale provided by PEOs make them an appealing solution for smaller companies looking to supply a wider variety of benefits to their employees, without needing to shop, administer or oversee these plans.
PEOs keep a fully staffed worker benefits department that’s centered on finding cost-effective and comprehensive benefits to make available to its clientele. Since PEOs have the manpower to tackle this daunting endeavor, the small employer only has to join the PEO program and revel in access to the benefits without the duty to administer the plans.
Like many companies, the PEO provides its customers standard major medical insurances with the large insurance carriers. But because of the size of the pool of employees, PEOs like a stronger relationship with the insurance firms which enables them to provide a wider range of programs and coverage choices, with increased efficacy on enrollments and enhanced customer support. Even though a small business independently may procure a benefit plan with one or two co-pay options, a PEO offers as many as 8-10 options for the exact same employer.
In addition to major health, a wide selection of supplementary benefits, such as dental, vision, life, and disability insurances are available. CPEhr additionally extends its benefit offering to include additional employee programs such as such as traveling, cancer and alternative health care insurances, credit unions, Flexible Spending Accounts, and powerful 401 (k) plans. The Small Business Administration estimates that merely nineteen percent of workers working in a small business have access to a 401 (k). That amount skyrockets to an estimated 95 percent in a PEO arrangement.
While it’s clear that not every small business will want, or even want, to provide this wide array 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 extraordinary opportunity PEOs offer to help level the playing field in the complex and tough employee benefits surroundings.
Conclusion
Rising health insurance premiums, complex employment and benefits management, and a weak economy are all making the task of procuring affordable, manageable health insurance more daunting for the normal small employer. Particularly in California, where 75% of the uninsured population is in the workforce, these challenges are reaching critical limits. More and more companies are turning towards alternative health insurance solutions, like joining a PEO for their employee benefit policies.