Credit: Adobe Stock
Health benefits cost increases are pounding a company that rents workers to other companies.
Mike Simonds, the chief executive officer of TriNet, a professional employer organization, said Friday that average health benefits costs are up about 9% this year, even after employers reduce the richness of their health benefits, increasing the enrollees' out-of-pocket costs and take other steps to hold down increases.
The Dublin, California-based company is coping by increasing the health plan fees it charges the employers that use its services, Simonds said.
"As you might expect, combined with an uncertain economic environment, our health plan fee increases have created a headwind for sales when compared with last year," Simonds told securities analysts during a conference call.
But TriNet is happy with the quality of the new employer accounts it is winning, and more are in the sectors it wants to target, he said.
What it means: Even companies that make negotiating great deals for health benefits the core of their business are having trouble controlling costs this year.
Professional employer organizations: A PEO serves as the official employer of people who work for other companies, to the extent allowed by law.
A PEO may provide major medical coverage, other health and welfare benefits, and retirement benefits for the workers.
TriNet: TriNet serves as the PEO employer for about 338,000 workers at 20,000 small and midsize employers.
The company also provides other benefits, human resources and advisory services.
The earnings: TriNet held the conference call with the analysts to go over earnings for the second quarter of the year, which ended June 30.
TriNet reported $37 million in net income for the quarter on $1.2 billion in revenue, compared with $60 million in net income on $1.2 billion in revenue for the second quarter of 2024.
The company streamed its earnings call online and posted a link to a recording on its website.
The health benefits cost backdrop: Analysts at PwC are predicting that group health costs will rise about 8.5% in 2026, or somewhat faster than this year, and a sampling of state small-group health premium announcements for 2026 shows a mix of states where rates will go up about as much as in 2025 and states where rates will go up faster.
Related: UnitedHealth, Anthem, Cigna unveil what small employers might pay for 2026 health coverage
TriNet might provide a better picture of what's happening at employer-sponsored health plans than most publicly traded companies because of its tight focus on serving employers.
The big insurance brokers tend to talk much more about their property-casualty operations and non-U.S. operations than about U.S. health benefits operations, and the big health insurers tend to focus on their Medicare plans and Medicaid plans and talk only briefly about employer plans.
Simonds' view: Simonds told the analysts that TriNet can protect its own operations against health benefits cost increases by increasing the health plan fees it charges client employers.
He emphasized that TriNet began the year understanding that it would face big increases.
"On a risk-adjusted basis, we are achieving the pricing levels needed to improve our insurance cost ratio as planned," he said. "We've observed more than six quarters of stable, albeit heightened, health care claim cost increases, and our confidence that the adequacy of our fee levels continues to strengthen."
Simonds said he thinks TriNet is roughly in sync with the rest of the PEO market.
"We're not putting prices out there that are terribly different than the competition," he said.
The fact that TriNet is in sync with the competition should help when the fall selling starts, he added.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.