Every employer is required by law to have workers’ compensation insurance. Although there are similarities, state workers’ comp laws vary. And because related rules and parameters can be extremely complex, many companies opt to outsource this risk to a professional employer organization, or PEO. Not only do these companies meet their legal mandates for workers’ comp coverage, but they also benefit from deeply discounted premiums.
Additional Perks to a PEO Partnership
In addition to taking the complicated, ongoing process of workers’ comp administration off your plate, working with a PEO helps you to build a better safety program for your organization. This includes program design and implementation, training, communications, and all the management details, which can prove invaluable in keeping your employees safe and injury free and lowering your costs.
For a PEO, the effective underwriting and management of workers’ comp claims is not optional; it’s essential.
This helps you as a PEO client, because PEOs invest heavily in risk management personnel and best practices.
- PEOS maintain multiple workers’ comp plans. Their objective in doing so is to have options when they analyze a potential client’s risk. There are guaranteed-cost policies with little to no risk for the PEO or its clients. These are among the most expensive plans on the market, as the insurance carrier assumes all the risk. They are typically arranged in a multiple-coordinated policy, or MCP. The PEO serves as plan administrator and aggregator, but each client is individually underwritten and has its own policy. The PEO is a central clearinghouse point for billing, claims reporting and other functions. An advantage to this model is that the client company’s experience is maintained and reported individually, so one bad apple won’t spoil the whole bunch. In other words, one negative occurrence doesn’t negatively impact costs for other companies in the MCP.
Workers’ comp plans may be fully insured or self funded – but the client company rarely knows the difference.
- PEOs that have mastered the practices of underwriting and risk management may choose to self fund a high deductible plan. If they are adept at it, workers’ compensation becomes a profit center for them. A PEO with effective underwriting and safety best practices can qualify for a master plan with a large deductible, in exchange for a deeply discounted rate.
It’s a lot to take in … but what’s the bottom line for your company?
When it comes to risk management associated with workers’ compensation – encompassing procurement, coverage, audits, premiums, safety plans and training, OSHA reporting and assistance, claims management, fraud investigation and more, what is your best option?
Lyons HR is an Employer Service Assurance Corporation (ESAC) accredited and Internal Revenue Service (IRS) certified PEO providing these and other HR and risk management solutions for small to mid-sized businesses. We help our clients operate more efficiently, productively and profitably, while minimizing risk and staying ahead of the competitive curve. Read our related posts or contact us today to learn more.