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Reply to Dealing with PEO's     
Old 03-23-2012, 05:56 PM   #1
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Dealing with PEO's Dealing with PEO's
Has any group health broker or agent had experience with clients being pushed towards PEO's by Payroll companies, ADP is the biggest. I'm in Arizona and it seems like they are pushing hard out here to sign people up.

Luckily, my clients call me first and ask me what they are talking about before they pursue anything. I know that online there are nothing but bad reviews and complaints, but I am wondering if anyone has found a really good way to make their clients understand the pitfalls and look past the lower premium numbers.
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Old 03-23-2012, 09:21 PM   #2
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Dealing with PEO's Re: Dealing with PEO's
Yes. I'm in the process of taking over a group now from a PEO (ADP), and we'll be saving them approximately $15,000 annually, most of this on health insurance costs.

My advice is to go out and find a respectable payroll company, a good financial advisor (for 401K), a good P&C agent (for work comp), and to work together on those cases to take them over or keep them away from PEO's. PEO's are a plague that businesses don't see sucking the life from their company until they've already made the mistake for a prolonged period of time.
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Old 03-24-2012, 02:06 PM   #3
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Dealing with PEO's Re: Dealing with PEO's
I have had success selling against them.

First off the PEO usually has weak networks with horrible drug formularies. Then there is the issue of customer service. The PEO does not have the staff or the training to give any kind of customer service.

Now I am seeing Payroll companies act as broker. This is a bit more of a challenge. Now you have to stress the customer services issue and you dam well better have a relationship with the carriers to back that up. Ask a payroll company to have a claim refiled and that don't have clue. They also really don't know what they are selling.

The last thing to sell against is admin fees. These PEO plans have huge admin fees. For a group of 20 admin can be close to $20,000 a year. Most of the time the client does not realize this.

There are some owners that just don't care. They would rather pay high fees and get bad service than have to work with 3 different vendors. Small companies that deal in the science fields will fall into this area

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Old 03-24-2012, 07:58 PM   #4
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Dealing with PEO's Re: Dealing with PEO's
Some PEOs have no integrity. Search Sommet Group in Nashville. At one time, they had naming rights to the Predators skating rink. They went out of business and didn't pay a lot of claims.

PEOs are basically self funded plans that you as a employer client have no control over and no way of knowing how financially sound they are.

As agent, give good advice and handle as much of the administration as your client wants and PEO will be just another competitor - looking in.
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Old 03-24-2012, 09:42 PM   #5
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Dealing with PEO's Re: Dealing with PEO's
From a former PEO owner and the company that ADP and Paychex try to emulate.

We left the PEO business in the dust 15 years ago and never looked back. ADP and most other PEO models are a sour point for most of the insurance industry and have never been thought of highly by health companies and work comp carriers.

Rates on health are not competitive and have been legislated State be State to eliminate the large purchase pools into underwriting by client using a common effective date. Federal law requires PEO's to only offer fully insured plans for Health and cannot self insure.

States that have not made that change to heavily regulate include Arizona and are being pushed into by ADP. You see, they need to grow their PEO business in order to keep it alive. However, ADP only grows by acquisition and not pure sales and can only survive in that business by pushing into States that have not been heavily regulated. "not many left"

PEO's have never gotten marketshare above 5% since their inception, Payroll and HR outsourcing controls 75-80% of the market with ADP and Paychex controlling 3/4 of that market and the rest to guys like me.

It has been said earlier that you should build a relationship with a payroll company to offer that with your Group Health. Could not agree more. Just be sure that the company owners are young enough to resist buyout offers from ADP/Paychex. That is how most Group Health servicing companies have vanished. With ADP/Paychex getting the AORs of you hard earned business.

Go to our payroll companies new distribution arm to see how to market payroll and keep your direct contracts with your carriers and cross sell with them. We guarantee in writing never to compete with our sales people regarding insurance sales. Our company was founded by insurance execs and built and sold by P&C Agencies. We are now moving to the L&A/H agents for distribution.

Call or PM me to talk further.
Patrick
EmpireNetworking.com
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Originally Posted by junkman View Post
PEOs are basically self funded plans that you as a employer client have no control over and no way of knowing how financially sound they are.
Actually, Self Funding is prohibited by Federal Law since 2004. After 9/11/2001, many PEO's went under, which were never reserved properly for future claims, especially in Group Health covered under ERISA. The feds stepped in and require all plans, including 401k's to be regulated and tested by each client company and cannot be in the name of the PEO.

The Fed's further jumped in, as of 2006 with Federal FUTA dumping regulation, forcing States to comply by end of 2007 to track Unemployment insurance by PEO client in order to stop moving to a PEO to save on Rates.

Work Comp is another story and a big issue. Most PEO's of size only have 1-3 carriers that will even consider taking a PEO as a client and must show clear risk management procedures. This leaves on the larger PEO's in most states offering competitive rates due to large deductible plans $500k per claim and up. Ex: ADP has a 1Mill Deductible. I love how some company's include Employment liability insurance with a $1mill policy. These are usually subject to a $1mill deductible to companies. I wonder how their future claims reserves look. ha ha ha ha....

Most PEO's are in their State's high risk pools and usually committing some sort of fraud in reporting wages improperly in order to stay profitable. Very Crooked business and Work Comp carriers know it.

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Last edited by TwiLight; 03-24-2012 at 09:56 PM. Reason: Posts merged
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Old 03-24-2012, 10:15 PM   #6
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Dealing with PEO's Re: Dealing with PEO's Genrose is the thread starter for: Dealing with PEO's

Thanks for all the insight. I've been gathering up some information on the consumer side to use, but getting some information from the broker side is also helpful.

I've already been setting up a network of payroll, accounting, and p&c companies to start being able to offer everything so that my clients and future clients do not need to even talk to these companies.

Thanks again
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