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Old 02-07-2014, 04:12 PM
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Default Health insurance through a PEO

I'm hoping someone can help me with general information about getting health insurance through a PEO (Professional Employment Organization).

1) Do the rates for medical coverage offered to client companies take into account the specific experience and demographics of the client company? For example, would a company get lower rates if their population is healthier or younger than other populations? Or are the same rates offered to all employers in the same region?

2) Is the PEO itself a self-funded entity that pools the experience of all employers? Or does the PEO simply negotiate for fully insured plans and pass on the cost to the client companies?

Any information would be appreciated. I searched online and wasn't able to come up with much information.
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Old 10-16-2019, 12:40 PM
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Probably a bit late on this response but yes, underwriting and pricing reflects the underlying experience of the client's employees. Re: Q#2, there is pooling that enables the PEO to have better negotiating power with carriers, but the PEO themselves are (usually) not self-funding or retaining risk. They more usually retain risk on the WC side of the house.
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Old 11-12-2019, 08:21 PM
psp-fifa-fan psp-fifa-fan is offline
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Originally Posted by booyah81 View Post
Probably a bit late on this response but yes, underwriting and pricing reflects the underlying experience of the client's employees. Re: Q#2, there is pooling that enables the PEO to have better negotiating power with carriers, but the PEO themselves are (usually) not self-funding or retaining risk. They more usually retain risk on the WC side of the house.
Could you explain more on how uw/pricing works in PEO? So the rates will vary based on employees' experience (e.g. risk factor)?

Thanks!
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Old 11-15-2019, 08:11 AM
ImSpartacus ImSpartacus is offline
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Originally Posted by psp-fifa-fan View Post
Could you explain more on how uw/pricing works in PEO? So the rates will vary based on employees' experience (e.g. risk factor)?

Thanks!
To speed up the process and avoid having to give every single prospect employer a questionnaire, PEO underwriting is sometimes done at the group level based on a collection of risk factors:
  • Geographic Risk (based on each employee's zip)
  • Demographic Risk (based on each employee's age & gender)
  • Industry Risk (based on the employer's SIC)
  • Claim Experience Risk (based on recent loss ratios for the employer's current plan)

And then the employer (often called a "worksite employer" or WSE at this point) will be placed in a tier commensurate to their risk. By tiering the rates for the PEO's plan, it provides a nice happy medium between having the same rates for every WSE (not stable given the variability in WSE risk) and having separate rates for every WSE (not administratively feasible).
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Old Yesterday, 09:41 PM
psp-fifa-fan psp-fifa-fan is offline
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Originally Posted by ImSpartacus View Post
To speed up the process and avoid having to give every single prospect employer a questionnaire, PEO underwriting is sometimes done at the group level based on a collection of risk factors:
  • Geographic Risk (based on each employee's zip)
  • Demographic Risk (based on each employee's age & gender)
  • Industry Risk (based on the employer's SIC)
  • Claim Experience Risk (based on recent loss ratios for the employer's current plan)

And then the employer (often called a "worksite employer" or WSE at this point) will be placed in a tier commensurate to their risk. By tiering the rates for the PEO's plan, it provides a nice happy medium between having the same rates for every WSE (not stable given the variability in WSE risk) and having separate rates for every WSE (not administratively feasible).
Thanks this is very helpful! So each employer's own experience will be used to calculate its own rate first then apply the tiering method to arrive to the final rate right? Or do all employers' experiences get pooled?

Last edited by psp-fifa-fan; Yesterday at 09:45 PM..
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