The PEPM insurance model supports greater engagement by placing a premium on the well-being of individual employees. When businesses invest in personalized insurance plans, employees feel valued and cared for, fostering a positive work environment. The resulting increase in morale and productivity is a tangible benefit that goes beyond traditional insurance offerings. It’s also a great recruitment tool to differentiate yourself in the hiring market and attract more talent. The cost per transaction model may not be as suitable for businesses experiencing growth or fluctuations in their workforce.

Our mission is to empower healing anywhere by offering companies the digital tools and clinical support they need to expand access to care. A transition to PEPM models will need bold leaders and innovators—that’s where you come in. One area of increasing cost, but easily monitored via the PEPM, is pharmaceutical claims. In addition to understanding the year-over-year costs, there are many national benchmarks for pharmaceutical PEPMs, which brokers or advisors can provide. A number of innovative and well-established cost containment programs exist to effect change, and the vast majority of today’s programs focus on how and where to source the prescription.

How PEPM and PMPM differ and the benefits of each

• Invoices are typically generated automatically when payroll is run, meaning fees are applied only when employees receive checks.
• The cost per transaction model can sometimes lead to hidden charges and inefficiencies in payroll processing.
• See why PLEXIS is the leading trusted software vendor in the global payer community.
• These subscription-based business models work by employers paying a set price to get access to a particular workplace wellness service.
• On the other hand, the PMPM model may encourage physicians to prioritize patient outcomes but may also lead to deferring necessary health services to save money.
• Additionally, businesses may select less efficient payroll workflows or technologies to minimize the number of transactions, compromising process efficiency and potentially causing errors.

The streamlined nature of the PEPM model simplifies administrative processes, including billing and paperwork. This efficiency translates to time savings for HR professionals, allowing them to focus on strategic initiatives rather than being bogged down by administrative complexities. If you already use other HR or accounting software, make sure the payroll service provider can integrate seamlessly with your existing systems. The PEPM model also offers flexibility, as businesses can easily add or remove employees from their payroll without affecting the overall pricing structure. This makes it convenient for businesses with fluctuating workforce requirements, seasonal employees, or if they need to quickly adapt to market changes.

Thus, this personalized approach enhances employee satisfaction and loyalty, contributing to a more engaged and motivated workforce. Understanding these differences is helpful for employers seeking a benefits model that aligns with their organizational culture and the well-being of their employees. The shift towards PEPM reflects a strategic move to a more individualized, employee-centric approach, redefining how businesses view and manage employee benefits. Unlike traditional plans that often treat all covered individuals as a collective unit, the PEPM model tailors benefits to the unique needs of each employee. This customization allows for a more personalized and employee-centric approach to healthcare coverage. One such approach gaining traction is the PEPM benefits model, or Per Employee Per Month.

For example, you may need to manually consolidate transactions or limit services like direct deposits to reduce fees. These additional administrative tasks can consume valuable time and resources that could be better spent on strategic HR initiatives. With the cost per transaction model, it can be challenging to accurately predict and budget for payroll expenses. Since the fees are based on the number of transactions, costs can vary from month to month, making financial planning more complex. Unexpected spikes in transaction volumes, such as during peak hiring seasons or workforce expansions, can result in significantly higher costs. The Per Member Per Month approach aligns well with managed care organizations with a value-based care approach.

When are PEPM & PMPM commissions paid?

Since the pricing is fixed on a per-employee basis, businesses can accurately forecast and plan their payroll expenses from month to month without worrying about unexpected fluctuations. Capitation models, like PMPM, prioritize preventative care and discourage unnecessary treatment. Healthcare providers are incentivized to manage costs and properly utilize healthcare services efficiently. This differs from the fee-for-service model, which focuses on the quantity of services delivered and often leads to unnecessary testing and treatment.

Expense Reimbursement Guide for Businesses

For more information on the “Magic Number” or healthcare spending in general, please contact Susan Denzio, As you can see, the PEPM model could save you money, especially if you process payroll frequently. That said, the changeover to a PEPM billing model by some providers has shed some light on the drawbacks that come with this model that may prove to be disadvantageous for some businesses. Whether you’ve been following along or simply skipped to this section (we get it), let’s dive into the benefits employers could enjoy with a PEPM model. Payroll involves sensitive employee data, so it’s crucial to choose a provider that prioritizes data security and compliance with all relevant regulations. Ask about their security measures and certifications to ensure the protection of your data.

The pay cycle frequency for PEPM and PMPM earned commissions should be determined based on what makes the most sense for your business. However, as stated above, the number of active enrollees in a plan can change frequently and having PEPM and PMPM commissions paid to insurance producers monthly reduces the need for chargebacks. At OpenLoop, we’re committed to helping you address those challenges by offering white-label telehealth support and digital health solutions to help your organization scale efficiently. Whether you choose the PEPM or PMPM model, we have resources, like a HIPAA-compliant EHR platform and access to 6,000+ NCQA-certified providers, that’ll help you seamlessly deliver quality care. Physicians experience greater levels of personal financial risk with the PMPM model, so they may reduce medical services and operational staff to save money. This could be problematic for patients with chronic conditions that require ongoing care, as they risk having their care deferred.

Related to Per Employee Per Month (PEPM)

From must-have features to red flags, it’ll help you make a confident choice you won’t have to rethink down the road. Payroll, in particular, can be one of the biggest expenses, so it’s important to find a pricing model that works with you, not against you. Look for a provider that offers ongoing support and resources to help you navigate any payroll or HR-related challenges. This could include access to a knowledgeable customer support team or educational materials. Unlike policies that earn an insurance producer a flat rate, PEPM and PMPM commission payouts can fluctuate if the active enrollees increase or decrease month to month.

Core Introduces Self-Setup Rules for Faster, Cost-Effective Implementation

However, those disparate reporting sources can be simplified to a single metric that links to what business leaders care about – cost! This single metric can help leaders evaluate options, monitor progress through the process and assess the impact to the health benefit plan accordingly for the next year. For example, if you have summer help and you forget to take them out of the system, you’ll end up paying for someone that hasn’t made you money. So, if you’re someone that gets busy, this model can quickly become frustrating and expensive.And the last con is… 3. I agree that the PMPM or PEPM model doesn’t really benefit the employer because they pay regardless of participation.

When is the Right Time for Accounting Firms to Switch Payroll Providers?

• This can result in an increased administrative burden for your HR or payroll team.
• By simplifying your payroll system, you can focus on your core business and leave the complexities of payroll processing to a trusted service provider.
• It’s also a great recruitment tool to differentiate yourself in the hiring market and attract more talent.
• According to JAMA, administrative expenses account for 15% to 25% of national healthcare expenditures annually.
• PEPM extends beyond mere healthcare coverage; it opens the door to incorporating wellness programs.
• As more healthcare organizations look toward value-based care programs, we’ll discuss five ways you might measure value-based care success.

An alternative to the PEPM model has been suggested by those who argue that a non-subscription model is better suited to the health and wellness needs of businesses. They propose a pay-as-you-go model, which places the financial risk upon the vendor. This suggests the vendor needs to take initiatives and offer services the client will actually use. Furthermore, subscription fees make it harder to generate positive return-on-investment (ROI). Many companies are now looking for a return on their corporate wellness programs to justify their existence (“Doctors on Demand,” 2015). In Powell’s post cited above, the author presents an example of a client with 40,000 employees who had access to what is pepm a second opinion program.

As your employee count increases, so does the number of transactions that need to be processed. This can lead to escalating costs, as every additional transaction incurs an additional fee. The lack of scalability in this model can make it less cost-effective and challenging to manage payroll as your business expands.

This approach provides organizations with stability, as they know what to expect each month cost-wise and can plan accordingly. PEPM extends beyond mere healthcare coverage; it opens the door to incorporating wellness programs. Encouraging preventive healthcare measures not only leads to healthier employees but also contributes to reduced long-term medical costs.

While seemingly the same as the PEPM, PMPM calculates premiums on how many members are on the policy. Employers can attract and retain good talent by offering personalized insurance plans. It makes employees feel like their health and wellness needs matter, which could pay off in the long run. For instance, the Integrated Benefits Institute found that poor worker health costs employers almost $600 billion annually.