What is a PEO Doing With All of My Information?

As a PEO consultant to many of the nation’s largest insurance agencies, we are often asked why so many documents are required to receive a proposal and what a PEO is doing with that data.  Your complete information is vital so the PEO can give your company an accurate pricing quote.

Receiving accurate pricing is the only way to make a fully informed decision to determine if the PEO is the right fit for your company.

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:

  1. Human resource functions, including payroll
  2. Employee benefits, especially medical insurance
  3. Workers’ compensation insurance
  4. State unemployment insurance

A PEO’s process to determine the pricing it will offer you is based on a combination of its risk tolerance, internal underwriting, and your company’s current costs.  Each PEO has a unique risk tolerance regarding 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 to determine if they can offer you their large group plans.  To ensure they consider all risk exposure at the onset, they must reconcile your census against your current, itemized medical insurance invoice to confirm accuracy.  If your business has over 100 employees, a PEO will ask for a claims history report from your carrier outlining your company’s medical experience.  This is needed to assess better the potential exposure of accepting your group.

Similar to medical insurance, each PEO has a different appetite for risk depending on the work your employees perform.  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 three years of workers’ compensation loss runs to understand your claims history better.

Providing the PEO with your state unemployment insurance costs is essential, as these figures can significantly impact the overall quote.  A completely informed decision cannot be made without considering this component.

Once a PEO has determined they can provide your company with a proposal, conducting a comprehensive PEO analysis is next.  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.

For more insight into the professional employer organization industry, sign up for the free eBook “The Truth About PEOs.”

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Onward Advisors combines unique perspectives and expert insights from decades of working at top PEOs. We do this through a unique, case-by-case approach, providing leading-edge analysis from our online platform to give clients unparalleled clarity and personalized analysis on which PEO solution is best for them.

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