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The PEO industry has been substantially impacted by COVID, particularly in the workers’ compensation and healthcare aspects of the industry. Even businesses that are historically looked at as low-risk, such as office clerical, technical, and professional roles, are seeing a higher level of difficulty with placement of affordable healthcare and workers’ compensation coverage. Legal and regulatory changes are increasing this impact; recent legislation has passed in some states, including California, and insurance carriers are being looked at as the responsible party from a workers’ compensation standpoint, whether injuries occur on or off the job. These state-specific mandates surrounding phased reopening are blurring the lines when determining who is the responsible party, significantly impacting compensation while partially impacting healthcare. This extends to the contraction of COVID. Healthcare policy rates are continuing to rise, leading to increased renewal difficulty.




Regardless of the state, healthcare benefits companies are increasingly being held responsible for employees and employee dependents. Add in the level of uncertainty that exists in our post-COVID world, and even carriers that are traditionally risk-avoiders are unsure how the impacts of COVID will affect them. Many of these carriers have millions of dollars’ worth of claims that they’re unsure they will ultimately be responsible to fully incur costs for, and regardless of their responsibility, they will still need to defend these claims. In turn, the increased expenses and uncertainty, combined with the intrinsic risks of the PEO industry, has made it one of the hardest insurance markets for the industry. The hardening of the healthcare market, as well as the PEO industry, has led to difficulty adding new clients to established master programs as well as directly for PEOs themselves. Current PEO healthcare policies are therefore increasingly affected, as adding new business has been challenging.

While a healthcare, IT, or office-based professional wouldn’t traditionally be a risky employee classification for a carrier, in a COVID world these types of employees are constantly at risk due to the nature of the job and the transmission of this virus.

Regardless of role, many industries that are traditionally “safe” create an increased risk of worker’s compensation claims due to COVID. Additionally, even companies that have had stable insurance are facing carriers not allowing the addition of new worksites, or, if the company is a PEO, new client locations. This stunts the growth of existing PEO firms in an industry that is already navigating a challenging environment due to general business loss or reductions.

Even before COVID, PEOs and their client companies were facing rapidly changing regulations. These companies are now having to navigate additional emergency regulations that differ by state, city, and even zip code, and may not have the manpower or resources to keep up with these changes. 

These considerations will impact PEOs now and in the future. In the immediate term, we must support and educate clients to ensure they are working toward best practices and standards of care to safeguard their employees as best they can. Moving forward, companies can best handle risk by building in an additional layer of protections, for example, adding a component to the client intake process during which the company’s COVID handling practices are evaluated and reviewed by the PEO’s legal or HR department. 

PEO firms need to go the extra mile to help customers review and comply with new requirements and should also add COVID-related evaluation practices for both current and new clients. We are all in this together and need to continue to do what is best for all our employees.



President & CEO

Lighsource HR

Orlando, Florida


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