When it comes to workers’ compensation policies for Professional Employer Organizations (PEO), there are two common polices, master policy and multiple coordinated policy (MCP). Each can model can significantly impact coverage, cost, and compliance across different states, making it important to understand their key differences.
Master policy model
A master policy is a single insurance policy issued for the PEO or Employee Leasing Company, with all the PEO’s clients listed as additional insured. This means there is one experience modification rate that applies to the PEO and all its clients.
Multiple coordinated policy model
MCP consist of several individual insurance policies. Clients are issued policies under their own names, and their experience modifications are based on their claim experiences.
State regulations and market considerations
State regulations vary depending on whether the policy is being written in the voluntary market or residual market (Assigned risk pool). Some states prohibit the master policy concept, while others require the issuance of MCP.
- In the voluntary market, if the National Council on Compensation Insurance (NCCI) is the plan administrator, PEO policies are issued using the master policy model. However, if a different organization, such as Workers’ Compensation Insurance Rating Bureau (WCIRB), is the plan administrator, the MCP model is used.
- If written in the residual market (assigned risk), either master policy and/or MCP approach are being used. For instance, in Michigan and Oregon, PEO policies are issued using the master model, while in Illinois and Indiana, the MCP model is utilized. In these states, there is a twist – a policy must be issued under the PEO’s name for its staff or direct employees, and separate policies for each client under their names.
For a visual illustration of the states using the master policy model vs the MCP model, please refer to this map.
Choosing between a master policy and an MCP depends on the specific needs and structure of an organization. If you have additional questions regarding the differences of master policy and a MCP model, please contact a Marsh McLennan Agency (MMA) advisor.
