PEOs are businesses that provide comprehensive human resources services, including workers’ compensation coverage, to client companies. Florida statutes require all employers, with limited exceptions, to provide workers’ compensation insurance for their employees.
The Department of Business and Professional Regulation licenses and regulates PEOs as employee leasing companies. The Office of Insurance Regulation regulates the state’s workers’ compensation policy coverage forms and rates, licensing and solvency of insurance carriers, market conduct, and policyholder disputes, while the Department of Financial Services enforces employer compliance with coverage requirements.
PEO arrangements can affect workers’ compensation coverage, including which workers are covered, how experience modification factors are created, and how much notice a business receives before coverage is cancelled. The relationship between a PEO and its client companies can lead to a workers’ compensation coverage gap in several ways, including reporting issues, employee/employer disputes, and financial issues.
Industry stakeholders report that PEO-related insurance carrier insolvencies can be a result of PEOs holding large deductible policies. Some stakeholders reported that PEOs affect workers’ compensation insurance rates, but OPPAGA was unable to find data to show that these factors have actually affected the Florida workers’ compensation market. However, there are ways in which a PEO could pass on risk that could affect other businesses’ premiums, including denying claims for subcontractors’ employees or maintaining risk through large deducible policies.
OPPAGA identified a number of options for legislative consideration. The options are grouped into three categories: options to minimize the risk of coverage gaps; options to enhance claim handling and insurance coverage; and options to modify state regulatory authority.