By joining a PEO, companies join a much larger group of employees (a.k.a. risk pool). This allows small employers to have access to EPLI, benefits, health insurance, dental, vision, and 401K coverage often at a lower rate.
Historically, and now more than ever, large group health plans are packed with more robust benefits, and may enjoy lower rates based on a composite rate. Large health plan underwriters analyze claims data for the entire risk population, assign a composite risk factor, and create standardized rates for all the risk categories covered under the plan. This is in direct contrast to small group age-banded rates which can be different for each employee based on age and location. Small groups may find that their “ACA compliant” health plan has increased in costs with a significant decline in covered services and networks.
By joining a PEO’s large group plan, better benefits and rates may be available. Overall, does the PEO strategy offer a cost savings? Possibly. It is definitely worth investigating.