A business can get kicked off of their PEO or unable to use a PEO if even a single employee “overutilizes” insurance benefits. When it comes to health insurance this can mean one person has a severe illness or medical condition.
Why is that?
Since PEOs are an underwriting business that pools together multiple businesses to negotiate better rates from insurance carriers, a business within a pool can effectively raise the premiums of everyone else. PEOs make money by marking up insurance premiums so if premiums go up, they lose margin proportionally.
See also:
- PEOs offer better healthcare for small businesses…as long as employees don’t actually need it
- PEOs taking care of everything is a myth
- PEO was made up to dress up the image of employee-leasing