You may only have a few employees, but even so: administering health benefits is complicated. Not only must you find and select among insurers, you have to be certain that administration of health benefits complies with a long list of regulations and requirements.
Staying in compliance with all the regulations that employers offering health benefits face has grown more challenging in recent years with the implementation of the Affordable Care Act (ACA), and those challenges are expected to continue into the foreseeable future. Ask yourself the following questions to gauge whether you’re up to the challenge of administering health benefits for your company:
• Can I afford the software necessary to manage health benefits?
• How much of my time will administration of health benefits take?
• Could I find a provider to administer health benefits at an affordable cost?
The answer to the last question is very often “Yes.”
Why Outsourcing Health Benefits Administration Is Smart
Outsourcing generally works best for tasks that have certain characteristics. For instance, outsourcing is great for:
• Tasks requiring highly skilled practitioners
• Tasks that are highly repetitive
• Tasks requiring specialized knowledge
The administration of health benefits can hit on all three of these points. Service providers known as Professional Employer Organizations, or PEOs, are able to assume these burdens and their associated liabilities, freeing up small business owners to focus on the reasons they went into business to begin with.
What a PEO Can Do for You
With regard to health benefits, PEOs are able to pool together employees of many companies and are often able to get significantly more favorable premiums and plans than a small business can on its own. Outsourcing health benefits administration to a PEO can represent a better use of your company’s resources, because you let a professional cope with the many complexities of insurance administration while gaining more buying power than you would have on your own.
Most small businesses simply don’t have the resources necessary to hire an in-house expert to cope with important HR tasks like payroll, workers’ compensation, taxes, and health benefits administration. Furthermore, when they handle these tasks on their own, they can put themselves at significant risk, particularly if employees handling such tasks don’t have specific experience with these areas of specialty. A small business can easily spend $150,000 in legal costs if litigation arises, and that’s not including damages and loss of time. This alone can make outsourcing to a PEO worthwhile.
Selecting the Right PEO as a Partner
Part of selecting the right PEO partner is investigating the health insurance plans they offer and speaking with the insurer about how long it has done business with the PEO. You can check the ratings of insurance providers on websites like A.M. Best Co. You should also learn whether the rest of a PEO’s employee pool is in a similar risk category compared to your employees. If you have a young, healthy workforce, you may not want to be part of a pool that mostly consists of older workers who have higher claim rates.
Find out about first-day coverage for employees, because this can be important when you recruit new employees. Learn which risks you transfer to the PEO and which risks your business must continue to assume. Compliance risks you can transfer to the PEO generally include HIPAA and COBRA.
It is also essential that you learn how your PEO calculates your costs. Sometimes their cost calculations are complex, but it’s important that you understand exactly what you are paying for. You should also be able to contact your PEO through multiple channels (phone, web, chat, etc.) for convenience.
Business owners by definition have to be multi-talented, but they simply can’t do it all. Outsourcing back-office tasks like health benefits administration and other HR processes to a PEO lets business owners focus on generating income and growing as a business. In previous decades, outsourcing may have been reserved for larger businesses, but technology has made outsourcing affordable for small businesses, empowering them to compete more effectively. For many businesses, PEOs have had a tremendous positive impact on growth and productivity.
SourceOne Partners Can Help You Find the Right PEO
SourceOne Partners is in the business of connecting small businesses like yours with PEOs to administer health benefits, payroll, workers’ comp, or a combination of HR functions. SourceOne Partners takes the time to understand your business, present you with the best possible options, and ensure you understand how PEO costs are calculated and what they mean. With offices in Florida and New Jersey, SourceOne Partners can help businesses in all 50 states find the PEO solutions that keep them on the road to prosperity. To learn more, feel free to call 561-674-0748 or contact us online.