Understanding the Minimum Number of Employees for a PEO Healthcare Plan

The significance of the minimum number of employees for a Professional Employer Organization (PEO) healthcare plan is a topic of interest for many entrepreneurs and business owners. PEOs have the unique ability to provide benefits at a lower cost than individual employees or small businesses can arrange on their own. This is achieved through negotiated group health plans or by adding new employees to an existing master health plan with a large headcount.

The Role of PEOs in Healthcare

PEOs, or Professional Employer Organizations, offer a range of services including payroll, benefits, and human resources management. One of the key advantages of PEOs is their ability to negotiate health insurance plans that are more cost-effective than what might be available to a single employee or a small business. This is due to the economies of scale and the expertise of the PEO in negotiating with health insurance providers.

Master Health Plans and Minimum Employee Requirements

PEOs often have pre-existing master health plans that are designed to cater to a wide range of employers. In these cases, there is typically no practical difference in terms of minimum employee requirements whether you are adding individual workers or large groups. The master plan is pre-fabricated and designed to be a good fit for many different employer scenarios.

However, the minimum number of employees required to open and maintain a plan can differ based on several factors, including the location of the PEO, its policies, and practical market conditions. In general, PEOs with a master health plan have a minimum size criteria of around 5-10 employees. Some PEOs can even accommodate plans as low as 2 employees, or even 1 employee, provided it is not an owner or the spouse of the owner.

Custom Plans for Smaller Groups

For smaller groups or specific needs, PEOs can create custom plans. The minimum number of employees required to create such a plan depends on various factors, including the location and policy of the PEO. In other countries, the requirements for setting up a new health plan can vary significantly, with higher headcount usually offering more options.

Recommendations from Experienced PEOs

At Canadian Payroll Services, we recommend that clients stick with our master plan unless they have very specific and unusual health insurance needs or a larger and rapidly growing workforce. This approach ensures that our clients benefit from the robust and pre-negotiated terms of our master plan, which can be more cost-effective and comprehensive.

For those considering a PEO healthcare plan, it is advisable to consult with multiple providers and assess their minimum requirements. By understanding the specific needs and constraints of your business, you can choose the most suitable plan that meets both your budget and compliance requirements.