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What is a PEO Page 2
Benefits Administration
Shopping for health insurance is a time-consuming and frustrating task. The PEO spends a great deal of resources in finding cost-effective, comprehensive medical and dental plans. The plans offered are typically PPO (Preferred Provider Organization), HMO (Health Maintenance Organization). By pooling its employees in one group, the PEO is able to spread its medical claims over a larger premium base. This means much lower annual rate increases, compared to those suffered by small businesses.
Risk Management
One of the least promoted yet extremely valuable services to the client business is the risk management provided by the PEO in the areas of workers' compensation and unemployment. PEOs aggressively manage claims in both areas. Why? Because a work comp or unemployment claim goes against the PEO's experience and could affect its ability to compete. This is one of the greatest benefits of the co-employer relationship. Imagine a construction company with 10 employees that incurs a $200,000 work comp claim. The owner does not have the resources to manage this claim and it goes against the company's experience. This, in turn, raises the work comp rates to a point that could literally drive that company out of business. A PEO, on the other hand, has a department that will manage this claim, working to find a quick resolution. These efforts will inevitably result in a much lower claim cost.
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