PEPM Business & Finance

The term member includes any spouses or dependents that may be on an individual employee’s policy, so the premiums could be more expensive if several employees select plans with coverage for dependents. By aligning digital engagement, clinical outcomes, and financial metrics, One Care enables APC organizations to operationalize both PEPM and PMPM models with efficiency and confidence. Platforms like Medbridge One Care are designed to support these hybrid strategies by connecting the clinical and financial sides of value-based care. Advanced primary care organizations need systems that can track utilization, monitor outcomes, and integrate engagement data across employer and payer partnerships.

At Baron Payroll, we believe in fairness and transparency, which is why we use the per transaction pricing model. Do you really know what services you’re paying for? You have to pay whether you use their services or not. The only advantage of the PEPM model is for the payroll provider because they make more money with this model. As I said earlier, the payroll service provider charges a fee for each transaction processed.

Payroll Software Costs: Small vs. Mid-Market—What to Expect in 2026

Implementing telehealth services into both models could help you provide even more value to your employees through access to specialized care. 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. The employer costs for telehealth at a PEPM rate of $7 a month times 100 employees would be $700 per month, while an annual payment of $700 PEPM times 12 employees would be $8,400 per year. These costs vary from month to month based on health care use by covered persons (ie. employees and family and/or dependents).

What is the abbreviation for Per Employee Per Month?

The Per Employee Per Month model opens the door to health and wellness incentives that could lead to healthier employees. This payment model centers around customizing benefits based on individual employee needs rather than as a collective unit. A “pay as you go” plan may offer a more effective use of corporate healthcare dollars. If full utilization of 20 https://pakghaziusa.com/bookkeeping/the-importance-of-purchase-journal-for-your/ visits under the PEPM structure is achieved, an employer would be paying $420 per telehealth consult.

The once standard internal EAP – where EA staff are full or part-time employees of the employer sponsoring the EAP service – has largely been replaced by external programs or outsourced vendors . When employers pay PEPM fees, they are essentially paying for services that will almost never be fully utilized or found valuable by the entirety of their workforce. Another variation on this model is a hybrid of capitation and fee-for-service, so the employer only pays for services received. A proprietary, fee-based procurement website that summarizes benchmark pricing for purchasing agents revealed that the PEPM fee for comprehensive EAP services in 2018 was $1.08. It differs from fully-insured health plans where the employer pays the insurance carrier a pre-determined premium and in return the carrier pays for the healthcare expenses. While the initial costs of PEPM and traditional models may appear comparable, the true advantages of PEPM emerge over time.

And instead of paying per transaction, employers pay a flat fee per employee per month for a bundle of services they may or may not use such as payroll processing and tax filing. These subscription-based business models work by employers paying a set price to get access to a particular workplace wellness service. With GoPivot, you pay for engagement that leads to healthier, more productive employees and lower healthcare costs.

Because 99 times out of 100, PEPM is not the best pricing model for your business.Ready to make a switch to Baron?
Capitation models, like PMPM, prioritize preventative care and discourage unnecessary treatment.
For example, you may need to manually consolidate transactions or limit services like direct deposits to reduce fees.
These facts have resulted in telehealth plans being integrated as a PEPM item in major health insurance providers’ plans and as a voluntary benefit for employers and employees.
Much like cloud computing (AWS/Azure), software companies are beginning to charge based on the compute power required to run their AI agents.

An advanced primary care group partners with a regional manufacturing company to address rising musculoskeletal injuries. Population-level accountability and performance-based savings Operational complexity during transition from fee-for-service Excludes dependents, limiting population health visibility The following table outlines key strengths and limitations for APC organizations operating under a PEPM model.

This model encourages proactive management of high-risk patients and investment in preventive services like remote monitoring and behavioral health integration. The APC offers a digital MSK wellness program at $40 PEPM for 500 employees, providing access to on-demand education, telehealth check-ins, and self-guided exercise programs. Per Member Per Month (PMPM) is a fixed monthly payment tied to every covered individual—including employees, spouses, and dependents. Because PEPM ties cost directly to employee headcount, it excels in employer partnerships where predictability, workforce health engagement, and operational simplicity are priorities for APCs.

At its core, a PEPM model is an approach to employee benefits that centers around individual employees rather than a group. This model represents a departure from traditional insurance plans, offering employers a more flexible and cost-effective alternative. 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. The most forward-thinking APC organizations integrate both PEPM and PMPM models to diversify revenue and align incentives across employers and payers. For organizations ready to scale value-based care, PMPM creates accountability and opportunity, rewarding APCs that deliver better outcomes at lower costs.

The Per Employee Per Month (PEPM) benefits model is taking center what is pepm stage in the push toward more employee-centric healthcare options. The combination of better cost control, risk mitigation and a focus on preventive healthcare measures results in long-term cost savings for employers. With fixed monthly payments, businesses can better budget and plan for their healthcare expenses. Understanding these differences is helpful for employers seeking a benefits model that aligns with their organizational culture and the well-being of their employees.

With per-process pricing, your payroll costs are directly tied to your payroll frequency and employee count. The cost per transaction model is a payroll service model where businesses are charged a fee for each individual transaction processed. As your business grows and hires more employees, the per-employee cost remains consistent under the PEPM model. 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. One of the main benefits of the PEPM payroll services model is its simplicity.

A phone-only model showed a $0.60 PEPM; a three-session model, 0.77, and a six -session model was paying $1.71 PEPM.
These subscription-based business models work by employers paying a set price to get access to a particular workplace wellness service.
While both plans allow employers to improve cost management and streamline administrative functions, they also have their own advantages.
When employers pay PEPM fees, they are essentially paying for services that will almost never be fully utilized or found valuable by the entirety of their workforce.
At Lift HCM, we’ve worked with businesses of all sizes to simplify their payroll processes and demystify the costs.
But when software companies came into the market (like Office 365), ADP and other companies started using the PEPM model (charging per employee per month), which has now become a trend for the last decade.

What Is the Per-Process Payroll Model?

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. The pay cycle frequency for PEPM and PMPM earned commissions should be determined based on what makes the most sense for your business. 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.

By partnering with Tesseon you can enhance security, provide access to expertise and support, and ensure predictability in payroll expenses. Look for a provider that offers ongoing support and resources to help you navigate any payroll or HR-related challenges. Payroll involves sensitive employee data, so it’s crucial to choose a provider that prioritizes data security and compliance with all relevant regulations. This can result in an increased administrative burden for your HR or payroll team.

When QuickBooks Payroll Stops Scaling: Your HCM Upgrade Strategy

One way to mitigate these issues is to invest in telehealth solutions that improve operational tasks and promote disease prevention and early treatment. The value-based approach encourages improved quality of care and better patient outcomes while maximizing efficiency. Employers may notice a healthier workforce and decrease employee absenteeism by offering programs that address top health concerns, like weight management and mental health.

In the evolving landscape of employee benefits, businesses are turning to innovative solutions to ensure the well-being of their workforce. In insurance, PEPM stands for per employee per month and is a method some carriers choose to price their benefits or coverage. It’s ideal for capitated or shared-savings models where APCs manage chronic disease, preventive screenings, or comprehensive population health. PEPM works best in employer partnerships that prioritize predictable costs and measurable workforce engagement. To see how these models work in tandem, imagine a single APC organization managing both employer partnerships and payer contracts.

PLEXIS Health

The PEPM pricing model was originally adopted as a mechanism for transferring risk from employer to insurer to help create some financial predictability. Oh, and don’t forget to do a bit of digging on the major health problems in the areas where most of your employees call home. The growing popularity of PEPM is a paradigm shift in the way businesses perceive and manage employee benefits. Choosing PEPM is an investment in the financial health of the business, with dividends paid in sustained cost efficiency.

In addition, many administrative tasks are wasteful, costing the nation about $265.6 billion https://kingdomageonline.com/wika/what-is-an-audit-management-system-and-why-is-it/ per year.

There is a clear need for EAPs to significantly increase utilization, create a cost “off-set” in the employer’s health plan, and of course get paid more for doing so. In this way, access to high-quality, low-cost health care is becoming a reality, which resonates with the values of the wellness industry. This is because PEPM fees are collected regardless of how many employees use the service.

This "Consumption-Based" model is the industry's best hope for survival, but it requires a fundamental change in how sales teams are compensated and how investors model future earnings. Much like cloud computing (AWS/Azure), software companies are beginning to charge based on the compute power required to run their AI agents. This is forcing a transition toward "Outcome-Based Pricing," where companies are charged based on successful hires, completed audits, or resolved tickets rather than the number of people logged into the system. If an AI agent can do the work of five payroll clerks, the customer no longer wants to pay for five licenses; they want to pay for the outcome of a processed payroll.