PPO is not PEO

April 30, 2024

The HR world is filled with acronyms. Starting with "HR." The alphabet soup can sometimes be confusing and lead a person down the wrong pathway. For example, a business will never need to compare a PEO to PPO.

The acronyms sound alike, but the two are entirely different. A PEO, or professional employer organization, is a human resources outsourcing service that, among many other things, can help businesses access benefits so they can offer to their employees. A PPO, or preferred provider organization is a "type of health plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating providers," according to healthcare.gov.

So, a business would never need to choose between one or the other, but a PEO could help an employer offer healthcare coverage through a PPO. Nevertheless, this is a good time to take an in-depth look at each one.

What Is a PEO?

PEOs can simplify and streamline human resources functions for small and mid-sized businesses. A PEO is a comprehensive HR outsourcing solution that provides administrative services to its business clients. A PEO acts as a co-employer for its clients, meaning it becomes the employer of record for certain purposes. This designation allows them to remit wages and withholdings of the worksite employees that is paid in the PEO platform on their client's behalf and perform other responsibilities such as payroll processing and benefits administration. The co-employer relationship means that PEOs assumes certain employer-related responsibilities as spelled out in the contract.

PEOs typically help with a wide array of HR functions for their clients.

  • Payroll administration. Processing payroll includes calculating wages and benefits deductions, and direct deposits. This fundamental service includes staying up to date with payroll tax rules and requirements to help ensure accurate payroll tax filings and compliance including withholding, reporting and remittance.
  • Benefits administration. PEOs manage and administer comprehensive employee benefit plans, including health insurance, retirement plans, and other perks; negotiating with providers; and handling enrollment, payroll deductions, and supports compliance matters.
  • Workers’ compensation insurance and claims management. PEOs provide access to workers’ compensation insurance, manage claims processing and provides guidance and access to training to help with safety programs and to help reduce potential risks.
  • Risk mitigation. PEOs provides program with resources and best practices to help mitigate risks.
  • HR compliance guidance and support. PEOs stay updated with employment rules and requirements, providing best practices and support so their client can comply.
  • HR policy best practices. PEOs assist clients in providing best practices for HR policies, handbooks, and processes for client. These initiatives help to guide their clients through complex HR responsibilities.
  • Recruitment and onboarding tools. Recruitment tools, including job postings, candidate screening, and onboarding processes can be provided to attract and retain top talent for a business.
  • Performance management. PEOs offers clients with expertise and the application to help execute a performance management framework. Expertise includes helps to develop strategy and align with feedback that is simplified by technology to enhance employee performance and engagement.
  • HR technology solutions and support. PEOs offer access to HR software, tools, and technology platforms for managing HR tasks efficiently, providing training and support for clients to leverage technology for HR functions.

What is a PPO?

A PPO is a managed care health insurance plan that creates networks of "preferred providers" by contracting with hospitals, doctors, and other medical services. An employee with a PPO plan has access to insurance coverage for medical care from either an in-network or an out-of-network provider.

Here are some of the things customers can look for from a PPO.

  • Network of preferred medical providers. PPOs create a network of healthcare providers, including hospitals, doctors, specialists, and other healthcare facilities, with whom they have negotiated contracts for discounted rates and services.
  • Flexibility for participants. PPO plans allow individuals to choose their doctor, pharmacy, or hospital from within the network without requiring a primary care physician or referrals to specialists. This provides flexibility in accessing medical services based on personal preferences and needs.
  • Lower costs. PPO plan participants benefit from discounted rates and pre-negotiated fees when they use in-network providers. Both employers and employees can save on costs while still maintaining access to a wide range of healthcare services.
  • Out-of-network coverage. PPO plans may offer out-of-network coverage, allowing participants to seek medical services outside the network. Out-of-network choices typically come with higher deductibles and out-of-pocket costs.
  • Direct access to specialists. Unlike Health Maintenance Organizations (HMOs), which often require referrals for specialist care, PPO plans allow participants to directly access specialists without prior authorization or referrals.
  • Coordination of care. PPOs may offer care coordination services. This support can help participants understand their health benefits, schedule appointments, manage referrals, and ensure continuity of care.
  • Claims processing and reimbursement. PPOs handle claims processing, reimbursement, and billing for medical services rendered within the network.
  • Preventive care services. Coverage for preventive care services, such as routine screenings, vaccinations, wellness exams, and health education programs, are part of PPO plans to promote proactive healthcare management and disease prevention.

TriNet can help you transform your HR into a powerful business asset. In addition to services like providing access to big-company health benefits, processing payroll and more, it helps gives you a peace of mind so you can continue your innovated efforts. Your time is a precious resource. Navigating payroll processing, benefits and HR compliance can be distracting from growth-generating activities. We can help you grow with our modern HR and payroll processing technology and expertise that’s available to help with your complex HR needs.

© 2024 TriNet Group, Inc. All rights reserved. This communication is for informational purposes only, is not legal, tax or accounting advice, and is not an offer to sell, buy or procure insurance. TriNet is the single-employer sponsor of all its benefit plans, which does not include voluntary benefits that are not ERISA-covered group health insurance plans and enrollment is voluntary. Official plan documents always control and TriNet reserves the right to amend the benefit plans or change the offerings and deadlines.

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