Do PEOs Offer Workers’ Compensation Coverage? PEO Workers Comp Explained

If you own a business and have at least one employee, you already know that workers’ compensation is required. It’s tougher to figure out the best method to deal with it without having premiums eat up your money or compliance standards take up your time. These problems are only going to grow worse in 2026, when medical prices are going up, and claims are getting more complicated.

This is the good news. PEO workers’ comp solutions are made particularly for small and medium-sized firms to help them with these issues. We’ll explain how PEO workers’ compensation works, the several policy models you’ll find, why so many businesses are choosing this option, and the most important questions you should ask before making a decision.

Why Workers’ Compensation Matters More Than Ever in 2026

From 2021 to 2023, the overall cost of claims went up by 2% to 14% each year in 18 states. Costs keep going up because of medical inflation, and that tendency won’t stop in 2026.

Recently, California had a combined loss ratio of 127%, which means that for every dollar they earned in premiums, insurers paid out $1.27. That’s not going to last, and it’s causing premiums to go up all around the country. Florida, Texas, and New York are all feeling the same kinds of pressure because of their workforces and economies.

Claims for mental health are making things much more complicated. Of the 86 workers’ comp-related mental health legislation introduced around the country in 2023, 71 were specifically about PTSD. Mental health claims only make up 2% of all claims, but they cost 3.5 times as much as claims for physical injuries and take a lot longer to settle.

What does this mean for your company? If you’re in charge of workers’ comp on your own, you might be paying more premiums, having to go through more scrutiny during underwriting, and dealing with more complicated claims. Every year, the old way of doing things costs more and is harder to do.

Why this is important: filing, processing claims, reporting to OSHA, and integrating payroll are all connected. If an employee is hurt, the PEO usually takes care of claims intake, medical coordination, and communication with the insurer. This can save your small team a lot of time and mistakes that cost you money.

The Common Policy Models You’ll See

The model that the PEO utilizes affects your premiums, experience rating, and how your claims history looks if you ever quit the PEO:

• Master policy: The PEO has one major policy that covers a lot of clients. You obtain lower fees and less paperwork, but your company’s experience modifier (mod) may be combined with those of other clients. Good for small businesses and financial flow, but it can mask your own safety improvements.
• Multiple Coordinated Policy (MCP): The PEO and the insurer work together to keep each client’s mod and claims history distinct. That lets you keep track of your personal losses better while still getting some help from the PEO.
• Client-secured or client-purchased means that you keep your own insurance, and the PEO handles claims and safety services. You still have full control over underwriting, but you miss out on the big group discounts that a PEO may get.

Bottom line: ask which model the PEO uses and what happens to your mod if you leave.

Why Do Many Employers Pick a PEO For Workers’ Comp

1. Buying in groups can cut premiums. PEOs combine thousands of employees and often get better rates or group-rated plans than most small firms can on their own. That usually lowers costs for each employee.
2. Pay-as-you-go billing makes cash flow better. Many PEOs offer payroll-integrated billing instead of hefty upfront payments and annual payroll audits. This way, premiums are based on actual wages.
3. Claims are handled faster and more consistently. Dedicated claims teams, nurse case management, and return-to-work programs can help claims get settled faster and save money in the long run.
4. Following the rules and having coverage in more than one state. PEOs keep track of state rules, registration, and proof-of-coverage demands. This is very important if you have workers in more than one state.

A practical note: more than 200,000 U.S. corporations now deal with PEOs, which means millions of employees. This is a well-known way for employers to manage risk at the enterprise level without recruiting specialized claims staff.

When a PEO Workers’ Comp Solution Is a Great Fit And When It Might Not Be

Choose a PEO workers’ comp solution if:

• You run a small or growing company and want a lower admin burden and steadier premium billing.
• You lack internal claims expertise, or you hire across multiple states.
• You want bundled HR, payroll,l and safety programs in one vendor.

Be cautious about a PEO workers’ comp solution if:

• Your field is particularly high-risk (some PEOs won’t work with heavy construction or specialized trades).
• You need to keep a close eye on your experience mod because master policies can hide enhancements that are only relevant to your firm.
• You need a policy that is very specific to your needs or endorsements that the PEO’s carriers don’t offer.

Questions to Ask Before You Sign

1. What kind of policy model do you use? (Master policy, MCP, or client-secured?) What does that mean for my mod?
2. Who is the policyholder and the named insured? Put the response in writing.
3. How do you figure out and pay for premiums? Is pay-as-you-go an option?
4. Who is in charge of claims? Request SLAs for how long it will take to respond to claims and a sample claims workflow.
5. What kinds of safety and return-to-work programs do you offer? Ask for metrics or case studies.
6. What other expenses will I have to pay besides premiums? (PEO admin fees, a percentage of payroll, etc.) Get a list of fees and an example bill.
7. If I leave the PEO, how is my experience rating reconstructed? Understand transition mechanics

Quick Checklist (How to Evaluate a PEO Workers’ Comp Offer)

1. Request the policy disclosure and fee summary.
2. Confirm the policy model and what happens to your mod.
3. Ask, for example, for claims turnaround times and safety program details.
4. Compare payroll-integrated billing vs. traditional billing.
5. Run a 12-month cost model: premiums + PEO admin fees vs. the price of your current policy + internal staff time.

Why Connecticut Businesses Choose OEM America

We’ve worked with Connecticut businesses for 25 years and witnessed how much time and money they waste administering workers’ compensation on their own. Just filling out the paperwork can take up to three hours a week. When a claim happens, you can’t do anything else because you have to deal with medical treatment, insurance adjusters, and regulatory reporting all at once.

With our PEO workers’ comp, you don’t have to worry about any of that. We cover everything, handle claims from start to end, and give you access to safety initiatives that stop injuries before they happen. We know exactly what problems you have because we only work with organizations with fewer than 500 employees.

Ready to Simplify Workers’ Compensation with OEM America? Let’s Talk.

You can make an appointment with an expert at OEM America to start saving money and getting your time back. OEM will help you for up to four hours, examine your present workers’ compensation setup for free, and come up with a plan that will save you up to $1,000 per employee. Want to know more? Please fill out our contact form or call 860.528.5555. OEM America is a proud member of NAPEO and a BBB-accredited business. Employers trust us for clear advice, lower risk, and practical HR solutions that work.

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