How does Per-Employee-Per-Month PEPM Relate to What a Physician Is Paid? Physicians Direct Access

The growing popularity of PEPM is a paradigm shift in the way businesses perceive and manage employee benefits. From cost management and employee customization to risk mitigation and long-term savings, the advantages of PEPM may extend far beyond the capabilities of traditional insurance plans. The cost per transaction model can sometimes lead to hidden charges and inefficiencies in payroll processing.

Per Employee Per Month (PEPM) definition

This makes it easier for businesses to understand and budget their payroll expenses. PEPM stands for “Per Employee Per Month.” It refers to the pricing model used by payroll service providers, where businesses pay a fixed monthly fee for each employee on their payroll. This pricing structure allows businesses to have better control over their payroll expenses and enables them to budget more accurately. And, that expense covers medical claims, specific stop-loss, and aggregate stop-loss re-insurance. The premium structure is designed, with the help of actuaries, to create a profit for the insurance company.

The only advantage of the PEPM model is for the payroll provider because they make more money with this model. Core’s support team is available to help you sort through any questions or issues that may arise with your calculations to ensure that all of your commissions are paid timely and accurately. Contact us for more information or schedule a free demo and we can show you firsthand how we can seamlessly incorporate these calculation rules into your commission structure.

Change the Mindset and Create a Culture That People Don’t Want to Leave

Insurance commissions can be complex and PEPM or PMPM policies could only be one of many products and services that what is pepm producers may sell. Plus, carriers often have several plan and policy options with differing commission rates. The complexity of constantly changing variables such as enrollment participants can make it very difficult to calculate these types of commission payouts using only Excel spreadsheets.

• I have often thought, though, that more frequent interaction with medical personnel can benefit those who tend to set aside health issues to remain health conscious.
• On the surface, they seem pretty synonymous to each other—so what exactly is the difference between the two?
• These additional administrative tasks can consume valuable time and resources that could be better spent on strategic HR initiatives.
• One such approach gaining traction is the PEPM benefits model, or Per Employee Per Month.
• Encouraging preventive healthcare measures not only leads to healthier employees but also contributes to reduced long-term medical costs.

In comparing PEPM and PMPM, the primary distinction lies in their focus on individual employees versus a collective group. PMPM, or Per Member Per Month, operates on a broader scale, considering the entire group of covered individuals (children, spouses) as a unit. On the other hand, PEPM takes a more granular approach, treating each employee as a distinct entity with specific needs and preferences. Ensure that the payroll service provider has a track record of reliability and excellent customer service. Research online reviews, ask for recommendations, and assess the provider’s experience in the industry.

Powering smarter healthcare solutions

• ObamaCare forces plans to include benefits in a one-size-fits-all manner that practically guarantees surplus premiums for the insurance company because the premiums will cover unnecessary services.
• Therefore, organizations may need to invest in new technology that’s more efficient and accurate.
• As your employee count increases, so does the number of transactions that need to be processed.
• This could be problematic for patients with chronic conditions that require ongoing care, as they risk having their care deferred.

If the increase is in medical claims, a quick analysis should identify the top three costs based on PEPM. Depending up on the outcome of this quick analysis, a company can determine the course of action to address the rising costs. Fortunately, there are progressive providers that are starting to successfully implement a pay-as-you-go model of business. A shining example is Doctor on Demand, the country’s leading video telemedicine company.

Insurance producers that sell policies with PEPM and PMPM terms will receive commission on how many employees or how many members are actively enrolled in a given plan, respectively. The commission rate a producer receives can vary and depend on the individual policy, as well as the carrier. It’s a partnership that impacts your business and your people, so getting it right matters. That’s why we’ve put together a guide on How to Choose a Payroll Provider in 2025.

The value-based approach encourages improved quality of care and better patient outcomes while maximizing efficiency. The PMPM model, also known as Per Member Per Month, assigns a fixed monthly fee to each enrolled member regardless of the type and amount of services they need. Instead, the fee is based on the anticipated cost of issuing healthcare services to the member.

Why Are There Two Pricing Models for Payroll Services?

In an ERISA-based self-funded benefits package, the employer retains “unused” premiums and can refund the employees, reduce next year’s premium, or use the funds however he wishes. ObamaCare forces plans to include benefits in a one-size-fits-all manner that practically guarantees surplus premiums for the insurance company because the premiums will cover unnecessary services. This can be avoided by switching to a self-funded benefits package where the employer is technically the insurer who keeps the excess premiums. And, the employer can use stop-loss reinsurance to guarantee that his financial risk is no greater than it would be with a fully-insured BUCHA plan. The benefits of the PEPM insurance model could be transformative for employers seeking a modern and employee-centric approach to benefits.

The mix of spend articulated via the percentage for each bucket further highlights the points of comparison. Others will counter that greater fixed costs reduce the volatility during the policy year. The first payroll company, ADP, started using the per transaction pricing model in the 1970s. That meant that companies were only charged whenever they needed that service rather than on a monthly basis. Employee engagement is a cornerstone of organizational success yet often falls short in traditional insurance plans. These older models tend to lump a predetermined set of benefits together without thinking of the individual employee, many of whom will never utilize the benefits.

These international sourcing and/or patient assistance programs can drive savings from a moderate 10% to an astounding 100% subsidy. The awareness generated by PEPM monitoring can lead to specific tactics to lower costs. Insurance reporting is wrought with charts and graphs that document figures, percentages and acronyms that are difficult to understand in terms of cause and effect.

In the evolving landscape of employee benefits, businesses are turning to innovative solutions to ensure the well-being of their workforce. According to Mark Cuban, Billionaire entrepreneur and co-founder of Cost Plus Drugs, businesses are bleeding money from their less than superb healthcare benefit plans. In insurance, PEPM stands for per employee per month and is a method some carriers choose to price their benefits or coverage.

Cost Per Transaction Pros:

It will only take about an hour of your time because we do all the heavy lifting for you! The cost per transaction model can get a little tricky when it comes to making adjustments in employee paychecks. For example, if an employee needs two checks in a month, the employer will have to pay twice. We’d also like to take a moment to introduce OpenLoop, a white-label telehealth support company delivering a full-stack of innovative digital health solutions.

It also makes the vendor provide a service/product enticing enough to gain interest. The breakdown I’ve seen in the employer/wellness vendor relationship is promotion of the service/product. A vendor typically relies on the employer to promote their service and employers often do not put the energy into promotion and communication.