Human Resources Outsourcing Solves Small Business Health Insurance Woes

After pay, health insurance is the most essential inducement businesses utilize to recruit and keep employees motivated. Yet companies are finding the ability to supply cost-effective health insurance as premiums continue to grow and the choices available still decrease. Employers have started to think”out of the box” and are taking a look at new ways to offer their workers benefit programs and to keep them inspired.

NAPEO, the National Association of Professional Employer Organizations, conducted an employee benefits survey in November 2007 of its own members’ clients to comprehend the issues of small and medium-sized employers. NAPEO is an organization which represents companies, PEOs, which concentrate on providing human resources outsourcing support and worker benefits packages to midsize and small employers. Mirroring the sentiment the trade association found that health care costs were their second-biggest worry after attracting workers.

The poll also revealed that over half of the 365 small businesses surveyed said their premiums rose as much as 10 percent annually, and almost one in 10 told NAPEO they would ditch their health coverage next year or are unsure about it. A number of these companies said they’ll pass at least some costs next year. One in five said they’d increase co-payments for visits or office visits; one in four said they would raise premiums. payroll administration services

California Employers Feel The Squeeze

The poll was conducted nationwide, but employers 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 just another wake-up call,” says Holmes. “Soaring health insurance costs in California are hitting small businesses particularly hard and these businesses use the vast majority of employees. This is a very troubling development, not just for small businesses and their employees, but for the whole economy.”

A report recently published by the California State Library, qualified, “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 reveals some startling facts and reasons for larger concern in California:

” Between 1961 and 2002, health care costs increased almost without disturbance. No attempt has proven successful.

” Federal plans offer health care coverage to over 7.4 million Californians. If the programs weren’t in place, the amount of uninsured in the state would double check.

” More than 20% of Californians, 6.6 million people, now lack health care coverage within the course of this year according to a study conducted for the California Healthcare Foundation. PEO Lite+ | PEO Canada

” Of those without health insurance, an estimated 75 percent are working individuals and their households.

” As a result of the growth 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 content to continue along the traditional health care path for their own staff. While premiums increase, most think about it a cost of doing business. But several California employers are now turning to provide relief.

What is a Professional Employer Organization?

Professional employer associations or PEOsand pool tens of tens of thousands of employees under one roof and provide cost-effective management of small employers’ health insurance plans. PEOs help small businesses outsource their resources activities, such as HR policies payroll and risk management, so owners can focus on making a profit. The PEO behaves like an offsite human resource department, therefore tiny companies can obtain access. Especially in California, in which difficult insurance policies and employment rules weigh heavily on small businesses, it’s highly beneficial for little California employers to connect with a specialist PEO from the state.

Most PEOs make a”co-employment” connection with their clients, thereby sharing the risks and responsibilities of being an employer. The PEO assumes the part of the Administrative Employer, whereby it pays the workers, files payroll taxes, supplies health insurance, issues the workers’ compensation insurance, and oversees most aspects of the job. The client maintains the role of the Administrative Employer and continues to handle and oversee all functions relating to their own operations. This includes establishing salary, firing, hiring, and directing the workforce.

By means of this co-employment relationship, small organizations get the markets of scale enjoyed by large corporations. PEO customers can offer top-notch benefits retirement programs and packages to their employees, typically provided by their competitors. By relying upon the PEO, they could maintain a simple in-house HR infrastructure or none at all. The customer also can reduce hiring overhead. Costs about the monitoring of, and compliance with, labor legislation are reduced, as are the costs of failure to comply with such laws. The PEO provides time savings by managing routine and redundant jobs for its clients. This enables the business owner to concentrate on the organization’s core competency and grow its bottom line.

Creative and Affordable Insurance Options

According to NAPEO, the PEO industry grew over 15% in 2007, to $61 billion in gross earnings. Access is now provided by CEOs to employee benefits for 2-3 million Americans that are. This number continues to rise because the economies of scale provided by PEOs make them an attractive solution for smaller employers seeking to supply a larger variety of benefits to their staff.

PEOs maintain a fully staffed employee benefits department that’s centered on finding cost-effective and comprehensive benefits to make access to its clients. Since PEOs have the manpower to handle this task, the company merely has to join the PEO program and enjoy access to the benefits with no responsibility to administer the plans.

Like many companies, the PEO offers its clients standard major medical insurances with the large insurance providers. However, because of the magnitude of the pool of employees, PEOs like a stronger relationship with the insurance firms which enables them to offer a wider range of policy options and programs, with increased flexibility on enrollments and customer service. Even though a small business independently may procure a benefits program with one or two co-pay options, a PEO offers as many as 8-10 options for the exact same employer.