Recently Empire Blue Cross Blue Shield has announced reducing the plans available to New York’s small business market. More recently we published an article describing our opinion on the factors that lead to Empire’s decision, which will change the New York health insurance landscape for small businesses.
Now let’s learn how small businesses in New York that want to keep Empire can do so and how.
Professional Employer Organizations
PEOs provide HR Outsourcing services to small companies usually with 10-100 employees and have been operating in the US for about 30 years. Typical PEO Services include payroll services, HR services, workers compensation insurance, 401(k) plans, and health insurance. However it is the concept of Coemployment that allows PEOs to offer Empire to small businesses.
A Moment on Coemployment
Coemployment is what differentiates PEOs from your everyday payroll service provider or HR outsourcing company. Here is how it works: Company ABC and PEO ABC agree on a relationship whereby both companies employ the employees of Company ABC and split the various responsibilities of being an employer. Company ABC will be considered the worksite employer, and will retain all responsibilities of managing employees in their day-to-day activities: when to show up, what to do, how much they’re paid, etc. PEO ABC will be considered the employer of record, and will be responsible for filing payroll taxes, managing unemployment and workers comp claims, as well as administering the employee benefit plans.
Through coemploying with all of its clients, a PEO forms a conglomerate comprised of its many small business clients in order to create operational efficiencies and more importantly, gain leverage and bulk buying discounts in the procurement of health insurance. PEOs typically contract with a sole health insurance carrier and drive all of their clients to working with them. This allows them to leverage the law of large numbers, and spread risk over exponentially more subjects. So instead of being a 20 person company standing alone and dealing directly with a health insurance carrier, PEO clients are a part of 100,000 employee group dealing collectively with a health insurance carrier.
So how can PEOs offer Empire to Small Businesses?
When a small business coemploys with a PEO, they technically become a part of a multi-thousand employee company and for various purposes they are no longer considered a small business. In New York most PEO clients are considered to be large employers and are therefore subject to the regulations beset upon the New York Large Group market. Empire Blue Cross Blue Shield still offers a full breadth of health insurance plans for Large Groups in the state of New York, and therefore most PEO clients will have access to them. It must be noted that Large Group underwriting practices are different from those belonging to Small Group in New York, and depending on each specific company this will create favorable or unfavorable conditions. Do not jump about whether a PEO is right for your company, we recommend dealing with a sourcing advisory service like PEO Spectrum where you will have access to unbiased information on multiple PEOs instead of meeting directly with each PEO as this will be very time consuming. All PEOs are not created equally, and all PEOs do not provide access to Empire.
We welcome our readers to contact us at PEO Spectrum in order to arrange a free PEO analysis to determine whether a PEO will work for your specific company and to compare multiple PEOs simultaneously in order to gain the optimal vendor-client match.