What is a PEO broker?

Professional Employer Organizations, or PEOs, were created to help companies manage their HR tasks and benefits programs more effectively. PEOs essentially become co-employers and handle issues like payroll and health benefits for small and medium-sized businesses. 

If your company is considering working with a PEO, a PEO broker can help you find the right one. But what exactly is a PEO broker? 

A PEO broker connects businesses to professional employer organizations that can best meet their needs. These brokers are similar to employee benefits brokers, but instead of helping you find benefits, PEO brokers help you find a company that provides benefits for you. 

Since PEOs are becoming increasingly popular, there are many professional employer organizations to choose from. These organizations may offer differing levels of service or support, including various kinds of group health coverage. 

Working with a broker allows your company to easily compare options and find an organization offering the benefits you need at a fair price. 

How do PEOs work?

If your company is considering working with a PEO, you need to deeply understand what these organizations do. Your focus shouldn't necessarily be on what a PEO broker is but on how professional employer organizations help your business achieve its goals. 

Professional employer organizations allow small and medium-sized businesses to outsource certain HR functions, including:

• Payroll

• Employee benefits administration

• Group health insurance

• Tax compliance

• HR management

When your company hires a PEO, your company will still be in charge of hiring and firing workers, creating a company culture, and instructing workers on their tasks. However, the PEO will become a co-employer and take over all of the administrative and HR tasks associated with managing employees, including handling payroll taxes and providing workplace benefits. 

What is a PEO in insurance?

One of the biggest benefits of working with a PEO is access to multiple health insurance options. But what exactly is a PEO in insurance? 

Professional employer organizations sometimes insure your company's employees under their own group health insurance policies. Or they can help you form a big group with other businesses so you can negotiate insurance coverage more effectively. 

By enabling you to have more people in your group plan than just the workers at your business alone, PEOs help you get a better coverage rate since you are spreading risk among more people. The PEO also has more leverage to negotiate with the insurance company for better protection at competitive rates. 

PEOs can provide access to a wide variety of different kinds of insurance, including:

• Health insurance

• Vision insurance

• Dental Insurance

• Life insurance

• Disability insurance

• Pet insurance 

Your employees may benefit from accessing these different kinds of policies. However, neither your company nor your staff will have much choice about which group or individual health plans are available. The only options will be the group plans the professional employer organization works with.  

This is a key difference between a PEO vs. a broker that sells health insurance coverage directly to individuals or employers. Health insurance brokers offer a choice of a broad array of different insurance plans from different insurers instead of connecting you with a company that provides an established set of benefits on a take-it-or-leave-it basis. 

What does a PEO broker do?

PEO brokers play an important role in the formation of co-employment relationships with a professional employer organization. So, what is a PEO broker and how can the broker help you?

Working with a PEO broker will enable your company to do the following:

• Compare professional employer organizations 

• Identify a fully vetted high-quality PEO that can manage your company's HR and benefits

• Weigh the pros and cons of different PEOs

• Determine what services your PEO should offer

PEO brokers can assess your company's needs, research PEOs offering the services you're looking for; obtain proposals from PEOs, negotiate the terms of your arrangement with your PEO, and facilitate the transition process so the organization can seamlessly begin managing your HR, payroll, and insurance needs.

Some PEO brokers also offer ongoing support, liaising between you and the professional employer organization to ensure the relationship works well.

Finally, since PEO brokers work in this industry daily, they stay up-to-date on new regulations or compliance requirements that could affect your business.  The broker can alert you if regulatory changes or other shifts in the PEO landscape will affect your business.

Considering other health insurance options — How do PEO brokers work with ICHRAs?

Working with a professional employer organization makes sense in some circumstances if you want to step back from fulfilling all of the administrative tasks of managing employees. The PEO you choose will handle things like payroll and preparing a benefits package so you don't have to.

However, it can be an expensive approach to handling benefits and HR. The costs of a PEO may be between 2% and 12% of wages or around $500 to $1,500 per employee. Perhaps more importantly, options for what types of group health insurance to offer will be very limited. 

There are big differences when you compare a PEO vs. a broker offering health insurance plans. 

• If you are working with an insurance broker to find a group health insurance plan your company will buy, you can choose from just about any group health insurance that's within your budget. 

• If you work with a PEO, the organization likely has insurers they work with and perhaps group plans in place already. You'll have a lot less flexibility in finding plans that are a good fit for your employee's needs.

The good news is that an alternative may be cheaper and better for your workers. It involves using an ICHRA. 

An Individual Coverage Health Reimbursement Arrangement, or ICHRA, allows your company to set a budget for employer subsidies for healthcare.

ICHRAs allow your staff to choose from any qualifying plan on state or federal marketplaces or sold elsewhere in the individual market. Your allowances can be used toward their premiums, and any leftover money can be used for eligible medical expenses. 

Many companies benefit from an ICHRA rather than spending the time and effort to find a third-party organization to administer health benefits. This is due to the lower cost, broader coverage options, and positive impact on employee retention that comes from offering workers a choice of flexible health insurance plans.

Thatch can make implementing an ICHRA virtually effortless. In just minutes, you can establish your budget for your employee's health insurance stipend and set up to offer health benefits. Thatch helps your staff sign up, get the individual coverage they need, and spend any subsidy payments left over on qualifying purchases.

If you want the cost-effectiveness and flexibility that an ICHRA can offer, contact Tatch today to schedule a demo and see how you can offer your employees the benefits they deserve simply and cost-effectively.