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.
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Originally Posted by junkman
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.