Small Business Health Benefit Challenges… and Solutions

After pay, health insurance is the most importantand manages most aspects of employment. The client
inducement small businesses use to recruit and keepmaintains the role as the Administrative Employer and
employees motivated. Yet many employers are findingcontinues to manage and oversee all day-to-day
the ability to provide cost effective health insurancefunctions relating to their internal operations. This
more challenging as premiums continue to rise and theincludes hiring, firing, establishing wages, and directing
options available continue to decrease. Employers arethe workforce.
beginning to think "out of the box" and are looking atThrough this co-employment relationship, small
new ways to offer their employees benefit programs,organizations access the economies of scale enjoyed
and to keep them motivated.by large corporations. CPEhr's clients can offer
NAPEO, the National Association of Professionalpremium benefit packages and retirement plans to
Employer Organizations, conducted an employeetheir staff, typically provided by their larger competitors.
benefits survey in November, 2007 of its members'They can maintain a simple in-house HR infrastructure
clients to understand the concerns of small andor none at all by relying on the PEO. The client also
medium-sized employers. NAPEO is an organizationcan reduce hiring overhead. Costs related to monitoring
that represents firms, PEOs, which specialize inof, and compliance with, employment laws are
providing human resources outsourcing support andreduced, as are the often significant costs of failure to
employee benefit packages to small and mid-sizedcomply with such laws. In addition, the PEO provides
employers nationwide. Mirroring the sentiment acrosstime savings by handling routine and redundant tasks
the country, the trade association found that healthfor its clients. This enables the business owner to
care costs were their second-biggest worry afterfocus on the company's core competency and grow
attracting workers.its bottom line.
The survey also revealed that more than half of theCreative and Affordable Insurance Options
365 small businesses surveyed said their premiumsAccording to NAPEO, the PEO industry grew over
rose as much as 10 percent this year, and almost one15% in 2007, to $61 billion in gross revenues. PEOs
in 10 told NAPEO they would dump their healthcurrently provide access to employee benefits for 2-3
coverage next year or are unsure about it. Many ofmillion working Americans. This number continues to
these companies said they will pass at least somegrow as the economies of scale offered by PEOs
costs along to employees next year. One in five saidmake them an attractive solution for small employers
they would raise co-payments for office visits orlooking to offer a wider range of benefits to their staff,
deductibles; one in four said they'd raise premiums.without the need to shop, administer or oversee these
California Employers Feel The Squeezeplans.
The survey was conducted nationally, but employers inCPEhr maintains a fully staffed employee benefits
specific states, such as California, are being hit thedepartment which is focused on finding cost effective
hardest. Michael Holmes, Client Services Director ofand comprehensive benefits to make available to its
CPEhr, a Los Angeles-basedclients. Because CPEhr has the manpower to tackle
Professional Employer Organization, is not surprised.this daunting task, the small employer merely has to
"This is another wake-up call," says Holmes. "Soaringjoin the PEO program, and enjoy access to the
health insurance costs in California are hitting smallbenefits without the responsibility to administer the
businesses especially hard and these businessesplans.
employ the vast majority of workers. This is anLike most employers, CPEhr offers its clients standard
extremely troubling development, not just for smallmajor medical insurances with the large insurance
businesses and their workers, but for the entirecarriers. However, due to the size of the pool of
economy."employees, CPEhr enjoys a stronger relationship with
A report recently released by the California Statethe insurance companies which enables them to offer
Library, entitled, "Ninety Years of Health Insurancea wider range of plans and coverage options, with
Reform Efforts in California" by Michael Dimmitt, Ph.Dgreater flexibility on enrollments and improved
of the California Research Bureau, reviews the historycustomer service. While a small business independently
of health insurance in California dating back to 1918. Itmay secure a benefit plan with one or two co-pay
reveals some startling facts, and reasons for evenoptions, a CPEhr offers as many as 8-10 options for
greater concern in California:the same employer.
• Between 1961 and 2002, health care costsIn addition to major medical, a wide range of
increased almost without interruption. No effort tosupplemental benefits, such as dental, vision, life, and
contain them has proven successful over the longdisability insurances are available. CPEhr also extends
term.its benefit offering to include additional employee
• Federal programs provide health careprograms such as such as travel, cancer and
coverage to over 7.4 million Californians. If thealternative health care insurances, credit unions, Flexible
programs were not in place, the number of uninsured inSpending Accounts, and robust 401 (k) plans. The
the state would double.Small Business Administration estimates that merely
• More than 20 percent of Californians, 6.6nineteen percent of employees working in a small
million people, currently lack health care coverage overbusiness have access to a 401 (k). That number
the course of the year according to researchskyrockets to an estimated 95% in a PEO
conducted for the California Healthcare Foundation.arrangement.
• Of those without health insurance, anWhile it is obvious that not every small business will
estimated 75 percent are working people and theirneed, or even want, to offer this wide range of
families.benefits to its staff, it should be comforting for them to
• As a consequence of the growth inknow that alternatives exist. At the least, the small
premiums, the number of people covered by healthemployer should recognize the extraordinary
insurance in California decreased from 64.6 percent toopportunity PEOs offer to help level the playing field in
54.7 percent between 1987 and 2005.the complex and tough employee benefits
Some employers are content to continue along theenvironment.
traditional health coverage path for their staff. WhileConclusion
premiums rise, most just consider it a cost of doingRising health insurance premiums, complex
business. However, many California employers areemployment and benefit administration, and a weak
now turning to the PEOs to provide relief for theireconomy are all making the task of procuring
employee insurance woes.affordable, manageable health insurance more daunting
What is a Professional Employer Organization?for the typical small employer. Particularly in California,
Professional employer organizations, or PEOs, poolwhere 75% of the uninsured population is in the
thousands of employees under one roof and provideworkforce, these challenges are reaching critical limits.
cost effective management of small employers' healthMore and more employers are turning towards
insurance plans. Additionally, PEOs help smallalternative health insurance solutions, such as joining a
businesses outsource their time-consuming humanPEO for their employee benefit coverages. One such
resources chores, such as payroll, HR policies and riskfirm, CPEhr, is a leader in the California marketplace
management, so owners can focus on making a profit.and can provide these solutions efficiently and cost
The PEO acts like an offsite human resourceeffectively for state-based businesses.
department, so even small employers can gain accessAbout CPEhr
to expertise typically reserved for larger, moreFounded in 1982, CPEhr is one of the largest, privately
established organizations. Particularly in California,owned human resources and professional employer
where complex employment rules and difficultoutsourcing (PEO) firms in California. With 25 years
insurance guidelines weigh heavily on small businesses,experience in the California market, CPEhr has an
it is highly beneficial for small California employers toadvantage in its knowledge of statewide employment
connect with an expert PEO in the state, such aschallenges. CPEhr provides a personalized service that
CPEhr.extends to 35 states. CPEhr offers an array of
Like most PEOs, CPEhr creates a "co-employment"integrated human resources services that includes:
relationship with its clients, thereby sharing the risks andEmployee administration, human resources and labor
responsibilities of being an employer. CPEhr assumeslaw compliance, payroll and tax administration, benefits
the role of the Administrative Employer, whereby itadministration and compliance, workers' compensation
pays the employees, files payroll taxes, provides healthadministration, risk management, training and
insurance, issues the workers' compensation insurance,development and recruitment.