Currently in New York, if you are an employer with fewer than 100 employees, you don’t have any leeway when it comes to pricing on medical insurance. This is due to New York State’s Community Rating Pool. This pool helps keep the market steady for small businesses and individuals who are seeking insurance. It may sound great at first, but it can cripple some companies financially.
Professional Employer Organizations can quote your company based off demographics. A PEO is an affordable solution for young healthy companies to receive better and more cost-effective benefits. A PEO does this by banding together many small companies, which allows them to base prices off demographics.
Join The Medical Link as we examine the Community Rating Medical Insurance Pool and PEO alternatives.
What is Community Rating?
Community rating is the practice of creating an average premium for all members of a risk pool who are spending varying amounts on healthcare. This means that those who are healthy for much of the year are “subsidizing” the care of the chronically ill through their insurance premiums. Of course, that’s how insurance companies are able to help their customers. The financial burden of care is carried, in part, by the healthy in order to help the ill.
In the state of New York, this process was put in place as part of the Affordable Care Act. This rule was set with good intentions; after all, it was meant to make it easier to care for older workers and those with recurring health issues and connect them with health insurance that meets their budgets.
However, even the best of intentions can sometimes have negative consequences. For small business owners in New York, they might find that community rating may end up costing them more. For businesses with young and healthy employees, they might end up paying more for their insurance plans in order to subsidize other businesses with older or chronically ill employees. More than just age and health status, some businesses in certain parts of New York might end up paying more because the community rating system has determined that health care costs are higher there. This means that small businesses may face higher rates in one neighborhood than the neighborhoods next door.
Higher insurance costs can be taxing on your business and your employees. You want to offer your employees the best coverage possible, but you also want to keep it affordable. So what are your alternatives?
How a PEO Can Help You Keep Costs Low
With the expansion of the community rating pool to include New York businesses with fewer than 100 employees, many business owners are looking for a solution. Rather than deal with the high costs of a community rated medical insurance pool, many small businesses in New York are instead taking advantage of everything that a PEO has to offer them.
How a PEO Works
A PEO can connect your business to the same quality insurance options that much larger businesses get. That’s because they share these costs across a number of different businesses. This process is called “co-employing,” and gives your PEO partner more leverage in getting better insurance packages than if you were to rely on a community rated pool or were to find medical plans on your own.
The fact is, even with service fees, many business owners are discovering that a PEO is more affordable than the insurance plans offered through a community rating pool. Not only are they saving more money and getting better coverage, small businesses in New York who use a PEO are treated to a host of other benefits that they wouldn’t have otherwise. For instance, at The Medical Link, we can help you with the administrative and HR tasks that are associated with insurance.
Expand Your Business With a PEO
Even with the costs of using a PEO, many small businesses have found that the rewards far outweigh the costs. Reports have found that businesses who partner with a PEO grow 7 to 9 percent faster than their competitors. This is likely the result of lower employee turnover, as small businesses who use a PEO see turnover at 10 to 14 percent less than others. Indeed, it’s estimated that a business that uses a PEO is 50 percent less likely to go out of business than those who use other plan providers.
The Medical Link is here to help you find a PEO that best meets your needs. When you’ve found the right PEO, they can help field many of the daily challenges and tasks associated with running a small business and maintaining a health insurance plan. They’ll support your HR and payroll departments by managing bookkeeping, tax payments, and unemployment claims. Since your PEO helped structure your insurance plan, they can also provide all of the on-boarding and training your new employees need to get enrolled in the insurance plan.
A PEO is Your Cost-Saving Solution in New York
We’ve partnered with some of the leading professional employer organizations in the country to ensure that your small business in New York gets the quality comprehensive coverage your employees deserve. From benefits packages to payroll and compliance, we can connect you with a PEO that best serves the needs of your business. Contact us today to find out more!