Human Resources Outsourcing Solves Small Business Health Insurance Woes

After cover, health insurance has become the most important inducement small businesses use to recruit and keep workers motivated. However, many employers are finding the ability to supply cost-effective health insurance harder as premiums continue to grow and the options available are still decreasing. Employers are beginning to think”out of the box” and are taking a look at new ways to provide their employee’s benefit programs and keep them inspired.

NAPEO, the National Association of Professional Employer Organizations, conducted an employee benefits survey in November 2007 of its own members’ customers to comprehend the concerns of small and midsize companies. NAPEO is an organization which reflects firms, PEOs, which concentrate on supplying human resources outsourcing service and employee benefit packages to small and mid-sized employers nationwide. Mirroring the sentiment throughout the nation, the trade association discovered that health care costs were their second-biggest worry after attracting employees.

The poll also revealed that more than half of the 365 small businesses surveyed reported their premiums climbed as much as 10 percent annually, and nearly one in 10 advised NAPEO they would ditch their health policy annually or are unsure about it. A number of these firms said they’ll pass at least some costs along to workers next year. One in five said they’d increase co-payments for office visits or visits; one in four said they would raise premiums. PEO Canada

California Employers Feel The Squeeze

The poll was conducted nationally, but employers in particular states, such as California, are being 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 challenging and these businesses use the huge majority of workers. This is a very troubling development, not just for small businesses and their employees, but for the entire economy.”

A report recently released 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 reveals some startling facts and motives for even larger concern in California:

” Between 1961 and 2002, health care costs increased almost without disturbance. No attempt to include them has proven successful over the long run.

” Federal programs provide health care coverage to over 7.4 million Californians. If the programs weren’t in position, the number of uninsured in the state would double.

” More than 20 percent of Californians, 6.6 million people, now lack health care coverage within the course of this year according to research conducted for the California Healthcare Foundation.

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

” As a consequence of the growth in premiums, the number of individuals covered by health insurance in California decreased from 64.6 percent to 54.7 percent between 1987 and 2005.

Some companies are content to continue together the conventional health care path for their own staff. While premiums rise, most simply think about it a cost of doing business. But many California companies are now turning into the PEOs to provide relief for their worker insurance woes.

What is a Professional Employer Organization?

Professional employer associations or PEOsand pool tens of thousands of workers under one roof and provide cost-effective direction for small employers’ health insurance plans. Additionally, PEOs help small businesses outsource their time-consuming individual resources activities, such as payroll, HR policies and risk management, so owners can focus on making a profit. The PEO behaves like an offsite human resource department, so even tiny companies can gain access to expertise normally reserved for larger, more established organizations. Especially in California, in which complex employment rules and difficult insurance guidelines weigh heavily on small businesses, it’s highly beneficial for little California employers to connect with a specialist PEO from the state. Get staffing services canada here.

Most PEOs create a”co-employment” relationship with their clients, thus sharing the risks and obligations of being an employer. The PEO assumes the role of the Administrative Employer, whereby it pays the workers, files payroll taxes, provides health insurance, issues the employees’ compensation insurance, and oversees most aspects of employment. The customer maintains the role as the Administrative Employer and continues to manage and oversee all daily functions relating to their own internal operations. This includes hiring, firing, demonstrating wages, and directing the workforce.

By means of this co-employment connection, small organizations access the markets of scale enjoyed by large businesses. PEO clients can offer top-notch benefit packages and retirement programs to their employees, typically provided by their larger competitors. They could maintain a simple in-house HR infrastructure or none whatsoever by relying upon the PEO. The customer also can reduce hiring overhead. Costs associated with monitoring of, and compliance with, labor laws are decreased, as are the often significant costs of failing to comply with such legislation. In addition, the PEO provides time savings by handling routine and redundant tasks for its clients. This allows the business owner to focus on the company’s core competency and grow its bottom line.

Creative and Inexpensive Insurance Choices

Based on NAPEO, the PEO industry grew over 15 percent in 2007, to $61 billion in gross revenues. PEOs currently provide access to employee benefits for 2-3 million Americans. This amount continues to rise as the economies of scale provided by PEOs make them an attractive solution for small companies seeking to supply a larger variety of benefits to their staff, without the need to store, administer or manage these plans.

PEOs maintain a fully staffed employee benefits department which is focused on locating cost-effective and comprehensive benefits to make accessible to its clientele. Since PEOs have the manpower to handle this daunting task, the small employer merely has to combine the PEO app and enjoy access to the benefits with no duty to administer the programs.

Like many employers, the PEO offers its customers standard major health insurances with the huge insurance carriers. But due to the size of this pool of workers, PEOs like a stronger relationship with the insurance firms which enables them to provide a larger assortment of programs and coverage options, with increased efficacy on enrollments and enhanced customer service. While a little business independently may secure a benefit plan with a couple of co-pay alternatives, a PEO offers as many as 8-10 options for the same employer.

Along with major medical, a wide range of supplemental benefits, such as dental, vision, life, and disability insurances are accessible. CPEhr also extends its benefit offering to include additional employee programs such as such as travel, cancer and alternative health care programs, credit unions, Flexible Spending Accounts, and powerful 401 (k) plans. The Small Business Administration estimates that only nineteen percent of employees working in a small business have access to a 401 (k). That amount skyrockets to an estimated 95% in a PEO arrangement.

Although it is obvious that not every small business will need, or even desire, to provide this wide array of benefits to its staff, it should be comforting for them to know that alternatives exist. At a minimum, the small company ought to recognize the extraordinary opportunity PEOs offer to help level the playing area in the complex and demanding employee benefits surroundings.


Growing health insurance premiums, complex employment and benefits management, and a weak economy are making the job of procuring affordable, manageable health insurance more daunting for the typical small employer. Especially in California, where 75 percent of the uninsured population is in the workforce, these struggles are reaching critical limitations. More and more employers are turning towards alternative health insurance solutions, like joining a PEO for their employee benefit policies.