A YEAR IN REVIEW: NAPEO’S LEGISLATIVE WINS ON HEALTHCARE

As 2024 draws to a close, it’s worth noting that this year has shaped up to be a successful year for NAPEO’s State Government Affairs team and our membership with the passage of two bills focused on codifying a PEO’s ability to offer PEO-sponsored health benefit plans for its covered employee in Kansas and Ohio. These two legislative matters were top priorities in the NAPEO 2024 State Government Affairs State Action Plan.

WINS IN KANSAS AND OHIO

Starting in the Heartlands region, NAPEO worked with the Kansas Insurance Department to include language in legislation codifying the existing practice of PEO-sponsored health plans in the state. Kansas Governor Laura Kelly signed HB 2790 into law on April 15 with an effective date of July 1, 2024.  This bill clarified a fully-insured benefit plan offered to the covered employees of a PEO is a single employer benefit plan under Kansas law and that all of the shared employees under the PEO arrangement will be treated as the employees of the PEO for purposes of determining what rules apply to a PEO’s insured health arrangement.

Moving east to Ohio, our team worked for more than a year to advance SB 175 through the various insurance committees.  Gov. Mike DeWine signed SB 175 into law in July with an effective date of October 24, 2024. This bill is essentially identical in effect to the Kansas law described above.

VALUE OF HEALTHCARE TO WSES

One of the valuable benefits that many PEOs offer to client employers is a PEO-sponsored group health plan that is fully insured through large group commercial insurance. PEOs have been sponsoring health plans for decades – both prior to, and after, the enactment of the Affordable Care Act (ACA). These plans have consistently provided worksite employees of small and mid-size businesses with large company benefits they would not have otherwise been able to access on their own.

In almost all states, PEOs have been able to sponsor large-group health plans with respect to their client employers (regardless of the client employer’s size). Different states have taken varied approaches in legislative language or regulations. Some states do not have specific language addressing PEO-sponsored plans but allow PEOs to operate large-group plans for the benefit of their client employers based on decades of established practice. As discussed in greater detail below, some other states have statutory or regulatory language expressly allowing for this.

NAPEO continues to work to clarify a PEO’s ability to offer PEO-sponsored benefit plans for its covered employees in the various states. While the practice has been in place for decades, to ensure legal certainty for client employers, PEOs, and most importantly, the participants and beneficiaries who receive health benefits through these plans, NAPEO believes legislation codifying this practice is essential.

PROGRESS IN MARYLAND – PEO HEALTHCARE STUDY

In addition to the two wins in KS and OH mentioned above, we are making progress in Maryland on the PEO-sponsored healthcare front.  As you may know, Maryland is one of three outlier states that does not allow PEOs to offer fully insured large group health benefits to worksite employees if the client employer is considered a “small employer” under state law.

The Maryland legislature has directed the Maryland Insurance Administration (MIA) to study the PEO industry as it “generally relates to health coverage and PEOs.” The MIA must report its findings to the House Health and Government Operations Committee and the Senate Finance Committee on or before December 31.

Maryland Delegate Lily Qi is the primary sponsor of HB 827 and requested this study in anticipation of filing legislation in the 2025 Session that would allow PEOs to offer large-group health benefits to MD client employers, regardless of the client employer’s size.

A Maryland manufacturing company brought this inequity to Del. Qi’s attention several years ago when she chaired a taskforce focused on how legislation can place Maryland on a competitive playing field with other states and countries. The final report published in December 2022 addressed the need for policies and programs to help Maryland workers prepare for the jobs of the future. The fourth item on the final report was, “Pass legislation that would open PEO access to any manufacturer under 50 employees.  Manufacturers want to offer the best benefits to our employees, but Maryland law currently prohibits manufacturers under 50 employees to get together to offer ‘large company benefits’ to their employees.”

NAPEO has provided information about the PEO industry to the MIA, upon their request, regarding the PEO model, the development of PEOs over time and a PEOs role in providing health insurance to small businesses.

TEAM BALL

The success of our NAPEO State Government Affairs Action Plan this year, especially as it pertains to codifying PEO-sponsored health plans in statute, is a testament to the involvement, dedication and advocacy of many of our members. As an industry, we’ve made great progress by working together. There’s more work ahead of us in 2025, but we’re ready!