Category Workers’ Comp

PEO Pros broker services has transitioned to a new division, EmployerNomics, which handles the retail side of PEO. To clarify, if you are an employer, and your employees aren’t perfect, you might want to consider some HR outsourcing solutions. You can reach EmployerNomics on this site or go to the direct site.

Either way works.

Of course, you can always call us at 407-490-2468. Remember, we can’t help you unless you reach out.

If you are a PEO owner and looking for insurance options for your PEO, this is the right place to be.

PEO Pros is proud to announce their appointment with Viking Underwriters, a MGA/wholesaler for property and casualty insurance lines, specializing in workers’ compensation insurance.

“PEO Pros has established a known and respected presence in the industry” Viking principal Dale Hanson tells us, “We have worked with them many times in the past and we are glad to re-establish the relationship.”

“The names Dale Hanson, Skylar Rupp and Marshall Gordon are legends in the PEO world,” PEO Pros CEO Will Tenney reports, “and we know they can provide the markets, the underwriting and most importantly, the service that our clients require. We’re glad to have the access to their expertise and strategic partnerships.”

This adds several carriers to the PEO Pros arsenal.

For more information please use the form below.

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Master Workers’ Comp Policies for PEOs and Staffing Companies

Workers’ Compensation coverage continues to be a big problem for startup PEOs and staffing companies. In certain states (California, for example), it is nearly impossible to find a carrier willing to take a chance on a startup operation.

“The staffing industry is particularly tough.” agent Will Tenney tells us. “Carriers that would have a look before have closed their eyes. The rising cost of claims is causing insurers to exercise extreme caution with untested staffing and PEO companies.”

The business has always been cyclic in nature, and it appears that a downturn is due.

What Changed?
The comp industry is best described as “long tailed.” Incidents and occurrences that happened 6 to 8 years ago are still showing a large effect. In states like California and New York, the policies of “employee first” are starting to show costs. The practice of “pay first, investigate later” is taking it’s toll on carrier surplus, and claims reserves are rising throughout the industry.

A spokesperson from a national carrier with a large PEO/staffing presence told us, “It’s not that PEOs and Staffing companies have a higher incidence of claims. That seems to be a level playing field. However, the process of resolving them can take longer when dealing with high deductible policies. Hence, the reserves build up and are held for a longer period of time. This makes taking on a startup PEO or staffing company a much riskier proposition to the actuaries.”

Is There an Upswing Coming?
The answer most given is “too soon to tell.” The wave of optimism sweeping the industry with a conservative administration is there, but many are waiting for that “long tail” to pull through.

What Can a Startup Do?
PEO Pros has been challenged by this dilemma. Clients have been advised to seek out a state fund / assigned risk situation to develop some history (at least three years.) This makes them much more attractive to a carrier.

Why Does Three Years History Help?
When a carrier takes the risk of underwriting a PEO or staffing firm, the potential downside can be very large. Consider a standard $250K high deductible policy. Should the PEO or staffing firm go under the carrier is then responsible for all the claims and associated expenses. Collateral helps, but doesn’t cover it all except in rare cases. The legal costs alone usually eat through collateral in a rapid fashion.

The actuaries prefer to have an established “book of business” to study, to predict performance by studying trends, and the three year (minimum) history.

Why Can’t We Grow Organically?
PEO Pros tells us: “We get asked this all the time. The startup wants to know what they can write and they will go find it. It sounds like a perfectly good business plan until you see the actuary’s side of it. They have no history, no performance metrics or industry trends to study. It is difficult to make a decision in a vacuum.”

Certainly, an established firm can continue to grow organically, but the initial approval is going to require a measurable book of business.

This is frustrating to startups. PEO Pros relates to us: “We often hear the complaints from the startup firms with words to the effect of ‘How are we supposed to start a business?’. It is frustrating to us as well, as we want to help. It is not a pleasant feeling, advising someone to go to a state fund to get three years experience first.”

What Can a Startup Do to Enhance Our Prospects?
There are a few things you can do to make your submission more attractive:

• Assemble a spreadsheet of proposed clients that have at least three years loss history
• Have company and personal financial statements ready, current and in good shape
• Senior board and staff resumes should reflect many years experience in the industry
• Avoid the tough states for now. Set up a corporation in an easier state and start there, before expanding in to California, New York, etc.
• Consult with PEO Pros about putting together a professional submission letter

If you would like to hear more about a master workers’ comp policy for your PEO or staffing firm, please call us at 407-490-2468 or use the contact form below.

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What’s The Difference?

In many ways, a Professional Employer Organization (PEO) and an Employee Staffing (Staffing) company are similar, but in fact they live at opposite ends of the HR spectrum. In this article, John Will Tenney of EmployerNomics and PEO Pros explains the history and formation of PEOs and a little of the differences and similarities between PEOs and Staffing.

A Brief History of Staffing and Employee Leasing Companies (which are now called PEOs)
In the early 80’s, a few enterprising, hi-tech individuals left their large traditional companies and formed their own hi-tech firms, with an emphasis on bidding on large government contracts, including military and other DOD contracts.

These problem solvers saw a way to better control costs by avoiding permanent hires, and hence avoiding the liability of permanent employees, by forming and using hi-tech staffing companies. The staff of these companies were only “employed” when the hiring firms had existing contracts that could cover the costs of the staff. Hence, they were able to bid a fixed cost with lower overhead, these new hi-tech firms were very competitive and won many contracts.

In response, the older, traditional hi-tech companies (who also had some brilliant business minds) put their heads together to come up with an answer to this challenge.

The idea of firing all their employees and hiring long-term staffing employees was not attractive, so they came up with what was called “reverse staffing.” All of their current employees were “transferred” to staffing companies created just for this purpose, maintaining longevity and seniority. These initial “reverse staffing” companies came to be known as Employee Leasing Companies, or ELCs.

In this case, the ELC was the employer of record, and handled all payroll, benefits, insurance and HR needs for the employees. In this way, the employee cost became a line item for the hi-tech firm, which in the accounting world is very desirable for simplification of taxes.

It wasn’t long before the owners and operators of the ELCs discovered that this benefit didn’t need to be restricted to the parent company, but could be shared, or more to the point sold, to third parties.

The construction and security industries were the first to recognize the advantage (hence Wackenhut was one of the first ELCs) but others soon followed. It was convenient and reassuring to place employees with an outsourcing firm that assumed much of the reliability and headaches associated with being an employer.

Currently, it is estimated that about 40% of the Florida workforce is either employed by a staffing company or a PEO (formerly known as an Employee Leasing Company).

So How Are They Alike?
Both entities provide payroll, insurance, benefits and HR services for employees “leased” to other companies. Both have advantages of “master” insurance policies which allows leveraging for better rates. Both can take advantage of professional HR systems and procedures to insure a safer workplace and lower unemployment rates.

OK So How Are They Different?
The easiest way to explain it is that if you don’t have employees yet, but are thinking of adding some staff or labor to your workforce, you may consider a staffing company. Kelly is a famous temp staffing company. There are also many hi-tech staffing companies still around such as Volt Technical. If you already have employees but wish that someone else would take care of the headaches of payroll, the hassles of workers’ comp insurance, the difficulties of large group health plans, the perennial fear of increased unemployment tax rates or even just remove the fear of an employee lawsuit by getting professional HR assistance, you would consider entering into an agreement with a PEO.

So What is Co-Employment and How is it Different than Leasing?
Recently, many states are passing legislation and codes to limit the complete transfer of employment to a PEO, and a new term has emerged, called “co-employment.” In this case both the PEO and the client are considered employers of record, but the duties and responsibilities of each or both are defined in the contract between the client and the PEO, called the Client Service Agreement (or CSA). It is very important to read this CSA thoroughly before entering in to an agreement with a PEO. It will be the governing document in any future employee disputes.

Where Can I Find Out More?
You can consult a labor attorney of course, and you should also consult a competent PEO broker. We became brokers because we could see the need for a third party in the agreement between a client and a PEO, much the same as any company will always need an insurance agent to negotiate with an insurance company.

And of course you can always contact one of us at PEO Pros or EmployerNomics. But remember, we can’t help you if you don’t call.
407-490-2468

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No matter what the outcome of the elections in November, change is in the air. Obamacare will change one way or the other. Medical costs are rising. Associated legal costs are also rising. This will affect payroll, payroll taxes, workers’ comp premiums, health premiums, HR issues and no doubt increase employer liability.

We heard this quote in a recent PEO services meeting: “No matter who wins in November, things are going to change. While you can’t plan, you can certainly prepare by choosing a professional HR partner.”

Small businesses will need to be prepared. So while it may be impossible to plan for what may happen, since it is such an unknown, there are still ways to prepare for whatever may come.

At PEO Pros, we have prepared by expanding our HR Outsourcing Brokers division, EmployerNomics. Not only have we added staff at our corporate office, we are now adding regional franchises.

We hope to assist small to medium sized employers with outsourcing these services, now more than ever:

• Payroll and Payroll taxes
• Workers’ Compensation Insurance
• Unemployment Insurance rate management and loss control
• Employment Practices Liability management
• Other employer’s risk management
• Employee Benefits
• Managing risk from employee litigation

We are here if you need us. If you would like to consider joining us, we have several attractive franchise areas still open. But either way, we can’t help you if you don’t call. So call us at 407-490-2468 or use the contact form below.

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“But you accepted this risk last year!”

How often do underwriters hear that? Often, a risk that was accepted last year is declined this year even though it appears nothing is changed. Sometimes the reverse happens. You’ll hear that something they declined from you last year was just accepted this year, and even worse, through another agent or PEO.

Why?

Why do underwriting standards change? What causes this?

We’ll discuss several things that can change:

• Medical expenses
• Carrier direction
• Rates
• Legal expenses
• Political climate
• Surplus

Increased Medical Expenses

These are constantly spiraling upward. Rather than reducing them, as originally intended, it is now apparent that the “Affordable Care Act” has nearly doubled the cost of medical care. This comes from numerous sources but seems to be centered around increased paperwork, taxes and administrative cost.

The cost of a cut finger nearly doubled, according to our PEO Pros actuarial staff, going from $300 with a $20,000 reserve up to $550 with a $40,000 reserve. The reserves are set based upon actuarial history of re-opened claims that involve further medical attention, lost wages and of course, (the big one) legal expenses.

Change in Carrier Direction

Carriers will often change direction of work covered due to numerous reasons. Some of those reasons include a change in ownership, change in AM Best rating, and determination of risk management spread. The company actuaries determine the optimum “spread” of risk, often called a “balanced portfolio.” The ideal balance is a mix of high risk (higher premiums), medium risk (moderate premiums) and low risk (very low premiums.) If a company finds itself unbalanced in one particular area it is a good business practice to shift the underwriting back to the proper balance.

Change in Rates

Many states are “administrative”, which means the rates per code are set by the National Council on Compensation Insurance (NCCI). In other states, the rates are approved by the state workers’ comp board. Getting a rate change in those states can be a long and cumbersome experience.

In either case, a carrier can find themselves in a different balance situation when rates change. Obviously this can affect the appetite for particular codes.

In a code/rate change situation, the powers that be (including the actuaries) of the carrier may be pushing for a change in underwriting standards.

Change in Legal Expenses

Even though great strides have been made to limit how much lawyers can charge in representing an injured employee (including some precedent setting court cases) the expense of legal fees have continued to spiral upwards. Naturally, this can have an effect on underwriting standards.

One particular effect, known in the industry as the “TV effect”, is the attraction of certain kinds of accidents, incidents and injuries to the media (such as anything aviation related, for example), that is causing many carriers to shy away from those lines of employment. The belief is that high profile accidents and injuries attract the media (seeking ratings) which then attract lawyers (seeking improved public awareness of their services), and therefore those relatively safe (from an incidence and occurrence standpoint) codes become classed as high risk, due to the increased likelihood of expensive legal fees.

Different Political Climates

This can be directly related to the above paragraph but there are also situations where certain governmental type institutions will become ineligible to certain carriers. Municipalities, for example, have an unusually high percentage of suspected fraudulent claims. In particular, in the last few decades, there is an alarming trend to treat the workers’ comp insurance as “100% health coverage”, simply by claiming the accident occurred at work. Since an increased experience mod does not directly impact municipal officials (it’s not their money, they just pass the expense on to tax payers) the incentive to reduce fraudulent claims is removed. Legislation has been added to address this but it is self defeating, as after all, who enforces it but the government officials? A dilemma to say the least.

Change in Available Surplus

By far the biggest factor in underwriting guidelines is available surplus capital. All states require a carrier to carry a certain amount of surplus capital to offset catastrophic losses. If surplus is low, underwriters will be directed tighten up the risk window until more surplus can be found. On the other hand, when there is adequate surplus, carriers will be more likely to expand the riskier parts of their balanced portfolio.

These are just six reasons a carrier can change underwriting standards. If there are any we have missed, please use the contact form below to help us improve this article.

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Wouldn’t it be great if employers could make all their employee problems go away? Make them “Somebody Else’s Problem”?

We believe that when the Employee Leasing industry chose “PEO” as their new, politically correct moniker, they chose the wrong letters. We think they should call them Employer SEP’s – where the Employee Problems become Somebody Else’s Problems. When an employer and a PEO form a business partnership, defined by the Client Service Agreement (CSA), many of the risks and responsibilities are transferred (in whole or in part) to the PEO and are no longer the employer’s headache.

Will Tenney talks about the choice of the letters “PEO”

Some of the headaches that can be shifted or at least alleviated include:

Payroll Tax Liabilities

Since the employees are now employees of the PEO for tax purposes, and registered on the PEO’s FEIN, IRS payroll tax audits are not as much of a threat anymore. In most cases the client isn’t even involved. The PEO is audited, shows their records and it’s all over. In rare cases, a PEO might have to produce information supplied by the client, but this happens so seldom you might call it a Payroll Unicorn.

Workers’ Comp Claims

The PEO will be the employer of record, so they will be responsible for paying all workers’ comp premiums, and involved in negotiating the claims. In most states, the experience modifier will stay with the PEO, and the client will not be adversely affected in the future by past claims. In addition, the PEO has safety expertise, training and written programs to put in place to reduce the frequency and severity of claims.

Unemployment Claims

Similar to workers’ comp, this becomes the responsibility (and liability) of the PEO, who is the employer of record. The State Unemployment Tax Act rate (SUTA rate) of the PEO is the SUTA rate that gets affected (in most states. There are some exceptions) and the client can maintain a clean record. In addition, the PEOs are much more experienced at handling and negotiating claims and experience has shown they are much more effective at removing false claims.

Employee Lawsuits for Employment Practices

Again, since the PEO is the employer of record, some or all of the liability shifts to the PEO in these cases. This could include:

• Sexual Harassment
• Wrongful Termination
• Discrimination
• Unfair Hiring Practices

… to name but a few.

If you would like to make some of your employer problems become Somebody Else’s Problem, please feel free to use the contact form below, or call us at 407-490-2468

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More and more states are legalizing prescription cannabis (for medical use.) This has got people to thinking about how this can affect workers’ comp “Drug Free Workplace” programs.

Tuesday November 4th marks a landmark day in Florida as (by early polls) this amendment shows signs of passing by an overwhelming margin.

PEO Pros would like your input on the situation. Please use the contact form at the bottom of this post to give us your opinion, feedback, etc.

We found one very interesting article published by Mountain Land Rehabilitation, (excerpts shown below).

Can we continue to have a drug-free work place policy?
• Absolutely. In fact, some states specifically permit you to do so.
If an employee is using medical marijuana, is he/she responsible for notifying the employer he/she is using medical marijuana?
• No. (PEO Pros thinks that this will be changed in Florida, as use of medical marijuana will probably be proscribed in sensitive job capacities, such as driving, operating heavy machinery, or other critical positions.)
Does federal law trump state law?
• Yes, in most cases. However that is a continuing issue of debate.
Can we take adverse action against an employee who is legally using marijuana?
• Yes, with some state-specific exceptions.
How will this affect the Department of Transportation (DOT) Drug Testing program?
• It won’t at all. The DOT has issued a statement noting that there will be no impact to federal programs.
What happens if an employee who has a prescription for medicinal marijuana has an accident at work?
• This will depend on the specific state, along with the details within your workplace policy. Marijuana cannot be prescribed (with very limited exceptions). The use of marijuana can only be recommended by doctors. You may also be able to deny Workers’ Compensation benefits in states that allow you to do so.
Will Workers’ Compensation insurance cover the injury or will that be an exclusion due to the employee being under the influence? If not covered, will the employee have a legal claim due to his usage being tied to a medical need?
• So far nothing has changed in the Workers’ Compensation world with regards to marijuana use. Some states have specified that insurance does not have to cover medical marijuana.
Can any physician prescribe medical marijuana for any medical condition or are prescribers and conditions limited?
• Medical marijuana cannot be prescribed in any state (with one exception used in very limited instances). The use of marijuana can only be recommended in such states that allow for medicinal use. Each state law outlines who is able to make the recommendation and under what qualifying conditions.
We have staff in multiple states. What is the best way to standardize policies across the board?
• Due to the way state laws differ and are ever changing, you simply can’t standardize a policy across the board.
What if an employee lives in a state where marijuana is legal, but works in a state where it is not?
• Typically employers have the right to include the screening for marijuana in their drug-free workplace policy, but this can vary by state law. In general, employers are not required to impose legal marijuana standards in states where the personal use of marijuana is illegal.
Will a candidate’s state-issued marijuana drug card be proof enough that he can legally use the drug?
• This will depend on the criteria in each state. The recommendation card is only the result of the individual qualifying under state criteria.
How long does marijuana stay in your system?
• This will depend on many different factors, including but certainly not limited to: the frequency of use; potency of substance; method of ingestion; personal metabolism; and the method used for screening. The recent use of marijuana can be best detected via oral fluid (approximately 1-12 hour detection time window). Other screening methods include urine (approximately 2-30 day detection time window) and hair follicle (approximately 2-90 day detection time window).
How will legal marijuana use by employees impact our insurance rates?
• In most states, you cannot have insurance pay for marijuana. However, that doesn’t address the other health-related impacts that may or may not affect health insurance rates

Please give us your comments below.

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One of the unforeseen negatives of the Affordable Care Act was increased costs for workers’ compensation insurance, coming both from higher taxes assessed to insurance companies and higher costs of claims. The claims costs are on the rise due to more dependance on workers’ comp vs. traditional health insurance, increased medical costs and the big one, increased legal fees.

As the costs rise, the profit margins diminish. Naturally, the carriers are seeking to reduce their risks to maintain acceptable profit margins. This has led to a “hard market” where risks that were previously accepted are now being cancelled or non-renewed.

Staying “Off the Radar”

It is important to any employer who depends on having reliable workers’ comp insurance to remain off the radar of the carriers and their underwriters. The squeaky wheel get’s the grease, or on this case, the cancellation.

Here are some tips to stay off the radar:

1: Do not shop your workers’ comp policy right now. This will only draw attention to you or your company. Many lesser experienced agents use software that “shotguns” your application to several carriers, and several intermediaries who may duplicate your submission. Nothing sends a red flag to an underwriter more than seeing a submission come in from multiple sources at the same time.

2: Don’t do anything to jeopardize your policy. Don’t hide information, improperly describe working conditions or in any other way try to deceive your agent or your carrier. This is not the time to try to get them to change you to a lower priced code.

3: Do everything you can to minimize claims. Institute a safety program, and if you already have one, make sure everyone is following it.

4: Make sure your website does not advertise you doing “high risk” activities. We’ve seen landscaping company websites showing workers on the roofs of houses, cleaning out gutters. That is NOT in the landscaping comp code description.

5: Pay your premium on time and in full. Slow pay and low pay are great ways to get “on the radar.”

Below is a video of our lead agent John Will Tenney with further discussion:

If you would like more information please use the contact form below.

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Why does a PEO need an insurance agent for their master workers’ comp policy? What does an agent or agency know that they don’t?

Why not just go direct? Cut out the middle man! Doesn’t it cost more money to have an agent involved?

Sounds good but in “real life” things don’t work out that way.

Here are some myths exposed about using an agent in the PEO Master Policy process:

Myth #1: Using an agent will cost the PEO money
Sounds reasonable doesn’t it? After all, the agent gets a commission and it’s a zero sum game isn’t it?

No it’s not. Carriers pay commissions to internal sales people if there is no agent involved, since the commission is already budgeted in to program costs. Also, an agent can negotiate a better deal, not having to worry about conflict of interest problems.

We recently examined two similar, master policy with a captive type deals from the same carrier. One with an agent, one direct. Guess which deal had more profit built in for the PEO. Go ahead. Guess.

Myth #2: The agent doesn’t do anything except for initial binding and renewals.
This one may have some truth in it. These agents are called “Star Trek” agents. They “beam in” for the renewal and then “beam out” again, not to be seen again until next year’s renewal. These agents don’t hold on to clients very long.

A good agent, with a good agency, will provide support on almost a daily basis. Processing new client submissions, advising on risk management, issuing certificates, etc, are all functions of a healthy agency in the PEO / carrier relationship.

Myth #3: Agents can’t help out with problems
Who is better to act as a third party negotiator but your agent? Licensed and trained to do so, an agent, with the power of their agency (and their book of business) often has significant leverage with a carrier, and can greatly influence the outcome of disputes. Certainly it always helps to have another view point in a disagreement.

What it comes down to is who do you trust with your money? When you business is a must, who do you trust?