Bringing Consistency and Predictability to the Creation and Management of a PEO Master Health Policy

PEO Master Health Policy

The purpose of this blog is to address what I believe to be, without question, the 2 largest hurdles within the PEO health insurance space:1)  How does a PEO build a credible pool from scratch so as not to be adversely selected against?2) How does a PEO prune their pool of business to become "risk attractive" to the major medical health insurance carriers?At Libertate, we take great pride and ownership in our stewardship of risk management business, especially in the areas of workers’ compensation insurance pool formation (creating the master policy), efficient distribution through data management, and overall prediction of price and performance.  Our leader, Paul Hughes, has spent his career building master workers’ compensation policies for PEOs and now looks to understand how to more effectively acquire, price and manage workers’ compensation and health insurance side by side.  In order to make this process credible and meaningful, we are very proud to introduce our actuarial partner, Milliman.  By far they have the most meaningful and impactful value proposition in terms of how to price health and build pools for PEOs.  The actuarial models they use are based on the largest documented population of past participants which are deployed to predict future risk, approximately 75 Million.Working in the National PEO health insurance space encompasses many complexities not generally experienced in the traditional risk and insurance markets.  The difference between placement of a 30-person group on an individual plan basis versus underwriting and pricing it as a part of a pool requires a far different skill set that is founded in actuarial science.  Specifically, the art of creating and managing pools of risk versus the understanding and pricing of an individual risk.  As it pertains to pooled PEO-sponsored medical plans for their respective client companies, we feel these complexities have created difficulty in building and then in managing to credibility an initial health insurance master policy.  We estimate that only 15% of all PEO’s (approximately 150) have a master PEO sponsored medical plan and we know we can move that needle with Milliman’s assistance and actuarial models.Collectively with our PEO clients, we engage and work with them side-by-side to make underwriting and pricing decisions.  Milliman checks our work at least twice a year (quarterly available) to make sure that our pricing is on course for a predictable renewal and to sometimes give the tough advice as to what will be needed to ensure one.  Whether we are working within the governance of small group underwriting or pricing amongst various bands of a PEO master health insurance policy, Milliman brings predictive modeling to the forefront of the conversation and makes for the purchase of major medical health insurance a far more predictable and manageable process.The bottom line is simple:  each PEO sponsored major medical plan MUST have risk “gatekeepers".  That is our role in concert with Milliman and our client.  These are individuals and organizations (plural) who are tasked with protecting the risk.  That means protecting the risk which is accepted by the PEO to participate in the master program(s), as well as managing the risk upon renewal to retain favorable risks within the pool, and excuse inappropriate risks from the pool as defined client companies with high risk factors and/or claims experience.Milliman is the most respected and recognized name in actuarial science. One could say that Milliman is the tallest giant in the room with regards to their abilities to forecast, manage, and model all things related to risk profiling.In it we collectively illustrate the positive financial impact that partnering with Libertate will bring to your PEO, and your respective client companies regarding medical loss ratios, premiums, and the importance of having true stewards of your risk at the helm.It remains unarguable that having a master medical/benefit plan within your PEO will encourage growth, and discourage client company turnover.  We see the PEO model as the very best model to properly deploy health insurance to small business (as well as workers’ compensation) and are excited about the opportunity of creating pools of risks for our clients that accelerates growth within the PEO community. James F. HughesVice PresidentLibertate Insurance, LLCC - 813.335.1588O - 407.613.5475www.libertateins.com707 E. Washington Street, Orlando FL, 32801

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The PEO Compass is a friendly convergence of professionals and friends in the PEO industry sharing insights, ideas and intelligence to make us all better.All writers specialize in Professional Employer Organization (PEO) business services such as Workers Compensation, Mergers & Acquisitions, Data Management, Employment Practices Liability (EPLI), Cyber Liability Insurance, Health Insurance, Occupational Accident Insurance, Business Insurance, Client Company, Casualty Insurance, Disability Insurance and more.To contact a PEO expert, please visit Libertate Insurance Services, LLC and RiskMD.