As a PEO consultant to many of the nation’s largest insurance agencies, we are often asked why so many documents are required in order to receive a proposal and what is a PEO doing with that data. Your complete information is vital so that the PEO can give your company an accurate pricing quote.
The following data is required in order to provide you with an accurate proposal:
- Employee census
- Itemized medical insurance invoice
- Medical insurance summary plan design(s)
- Workers’ compensation declaration page & loss runs
- State unemployment insurance rate (SUTA)
This information is required for accurate pricing because a PEO’s costs can vary from your company’s costs in four core areas. They are as follows:
- Human resource functions, including payroll
- Employee benefits, especially medical insurance
- Workers’ compensation insurance
- State unemployment insurance
The process a PEO uses to determine the pricing it will offer you is based on a combination of its risk tolerance, internal underwriting, and your current costs.
Each PEO has its own unique risk tolerance when it pertains to medical insurance and workers’ compensation coverage. As we’ve discussed previously, a PEO must underwrite your company to determine its ability to offer you its large group options for both of these products.
A PEO needs your employee census to understand your company’s demographics in order to determine if they can offer you their large group plans. To ensure they are taking all risk exposure into account at the onset, they need to reconcile your census against your current, itemized medical insurance invoice to confirm accuracy. If your business has more than 100 employees, a PEO will ask to see a claims history report from your carrier outlining your company’s medical experience. This is needed in order to better assess the potential exposure of accepting your group.
Similar to medical insurance, each PEO has a different appetite for risk depending on the type of work performed by your employees. Therefore, by reviewing your workers’ compensation declaration page they can verify that your company fits the profile of the type of business they want to bring into their risk pool. A PEO may ask you to provide at least 3 years’ of workers’ compensation loss runs in order to better understand any claims history you may have.
It’s important to provide the PEO with your state unemployment insurance costs as these figures can greatly impact the overall quote. A completely informed decision cannot be made without considering this component.
Once a PEO has determined they are able to provide your company with a proposal, it’s now time to conduct a comprehensive PEO analysis. This analysis includes a side-by-side comparison of benefit plans and a financial breakdown that compares the PEO’s costs to yours. This is the only way to determine the potential economic impact this proposal will have on your bottom line.