Master Health Policy with a Professional Employer Organization (PEO): Pros and Cons

Professional Employer Organizations (PEOs) offer businesses a way to outsource several human resource functions, including employee benefits management. One of the key services provided by many PEOs is a master health policy. This arrangement can have significant advantages and disadvantages for businesses considering partnering with a PEO for their health insurance needs.

Pros of a Master Health Policy with a PEO

1. Cost Savings

One of the most appealing aspects of a master health policy through a PEO is the potential for cost savings. PEOs pool together employees from multiple companies, which can lead to lower insurance rates due to the larger group size. This can be particularly beneficial for small and medium-sized businesses that might otherwise face higher premiums.

2. Comprehensive Coverage Options

PEOs often have the leverage to negotiate comprehensive health plans that might not be available to smaller businesses. This means employees can enjoy a wider range of coverage options, including dental, vision, and mental health services.

3. Administrative Relief

Managing health insurance can be a complex and time-consuming task. By joining a master health policy through a PEO, businesses can offload the administrative burden of managing health benefits, including enrollment processes, billing, and compliance with regulations.

4. Attract and Retain Talent

Offering a robust health insurance package can be a key factor in attracting and retaining top talent. Through a PEO, even smaller businesses can offer competitive benefits that are on par with larger corporations.

Cons of a Master Health Policy with a PEO

1. Less Control Over Plan Options

When joining a master health policy, businesses may have limited control over the plan options. The PEO typically selects the insurance carrier and plan designs, which might not always align perfectly with the specific needs or preferences of every business or their employees.

2. Potential for Service Issues

While PEOs can offer a high level of service, there's always the potential for issues such as delays in processing claims or difficulties in communication. Businesses need to ensure they partner with a reputable PEO that has a track record of excellent customer service.

3. Cost Variability

While initially more cost-effective, rates under a master health policy can fluctuate based on the overall health claims of the entire group within the PEO. If the group experiences high claims, premiums may increase, which can be unpredictable for budgeting purposes.

4. Dependence on the PEO

Relying on a PEO for health insurance can create a dependency that might be challenging if the business decides to leave the PEO. Transitioning to a different health plan can be disruptive for both the business and its employees. The vast majority of PEOs refuse to share claims data with the client and with the lack of information causes underwriters to have a very narrow viewpoint of your risk, so getting competitive quotes is extremely difficult.

Conclusion

A master health policy with a PEO offers a range of benefits, particularly for small and medium-sized businesses looking for cost-effective, comprehensive health insurance options without the administrative burden. However, businesses should carefully consider the potential downsides, such as less control over plan options and the possibility of service issues. Ultimately, the decision to join a master health policy through a PEO should be based on a thorough evaluation of the specific needs and circumstances of the business.