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PEOs. Master Policies or Client Policies

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PEO Master Policies versus Client Policies

Back in the early 90's most PEOs had master insurance polices for workers compensation and health.  The PEO industry was booming.  PEOs were able to establish master workers compensation with most carriers at a reduced rate and then marked up their rates to their customers.  The same could be said for health insurance.

Eventually many insurance carriers lost money on the arrangement due to excessive claims and losses, class code misclassification and premium fraud.  Subsequently many carries pulled out of the PEO market or created more stringent underwriting requirements. 

PEOs who were unable to get renewed began carving out workers compensation and/or health insurance in response to these changes.  It is currently more common for PEO to have a master workers compensation policy than a master health insurance policy.  But many PEOs now operate as ASOs or Administrative Services Outsourcing and carve out both workers compensation and health insurance.

PEO master workers compensation policies are a great tool for reducing insurance costs for client who have had some losses and may have an NCCI experience rating greater than 1.00 because a master policy allows a PEO to pay premium on the PEOs rates and experience modifier instead of the clients rates and experience modifier.

Client owned policies or carve out polices may be a better tool for employer who have developed a credit modifier lower than 1.00 due to low claims frequencies and loss ratios. 

Once an employer has been with a PEO for a period of time they will effectively loose their current modifier and it will reset to the base modifier of 1.00 which means they pay premium based on the carriers filed rates with not application of credits or debits.  This can be unfortunate for clients with good claims histories if they ever decide to separate from their PEO and process payroll in house or with a payroll service bureau.

Pay As You Go Insurance

Many carriers now provide access to programs known as Pay As You Go workers compensation for PEOs and payroll companies.  These programs allow for client owned policies to feel more like master policies in that they are managed by the PEO or payroll company and premium is reported in real time and documented by the payroll processing cycle.  The benefit of these programs include lower downpayment requirements and better protection from audit bills caused by underestimated premium via standard installment plans.

PEO Shop helps our customers evaluate PEOs, payroll programs, pay as you go options, and standard insurance solutions so that the best decision can be reached on a case by case basis.  Our agency also helps PEOs and payroll companies access markets for workers compensation programs such as captives, carve out, pay as you go, and more.

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