"High-risk PEO" is not a special kind of PEO. It is what owners search for when insurers quote a very high workers' comp price, or none at all. A PEO, or professional employer organization, is an outside company that shares the legal role of employer with you (co-employment) and runs payroll, benefits and HR for you, and many PEOs also supply workers' comp. That is one route for a hard-to-insure business. The other is your state's backup option for businesses no regular insurer will take. Both cost money, and neither is guaranteed.

The short version

  • Insurers judge you mainly on three things: the kind of work your people do, your past injury claims, and how often those claims happen.
  • A PEO may cover you under its own policy, but whether it takes you on is its own decision. No single number decides whether a PEO says yes.
  • If no insurer will cover you, most states have a backup plan, usually with a surcharge. In California, the state-created insurer, State Fund, can turn a business down only for limited reasons set in law.
  • What to do: check that your job codes (insurers call them class codes) are right, get your claims history in writing, and compare the full price of a PEO with your best backup-plan quote.

Workers' comp pays medical bills and part of lost wages when an employee is hurt on the job. For how it works under a PEO, see our guide to PEO workers' compensation.

What "high risk" means to an insurer

Your job codes set the starting price. Every type of work has a class code, and each code has a rate: a price for every $100 you pay the workers in that job. Every trade has its own code, so ask your agent which ones cover your crews. The spread is huge. In Idaho's 2026 rates, office work (code 8810) costs $0.117 for every $100 of pay. Carpentry on houses of up to three stories (code 5645) is $8.152. Same state, same year, about 70 times the price.

Codes are often wrong. NCCI, the organization that writes the workers' comp pricing rules in most states, inspects businesses to check their codes. Among inspected policies coded mainly as office staff (8810) or outside sales (8742), about 36% had the wrong code for the business's main work. A change can push your price up or down, so check your codes with your insurance agent before you accept that you are high risk.

Your claims history adjusts the price. That adjustment is your experience mod, a number that compares your injury costs with those of similar businesses. It usually uses the latest three years of data. A mod of 1.00 is average. Above 1.00 raises your price (insurers call it a debit mod); below 1.00 lowers it. A 1.35 mod, for example, means 35% more. Very small businesses may not have a mod at all: you only get one once your premium reaches a level your state sets.

How often you have claims matters more than how big they are. NCCI's own example: 10 small claims of $5,000 each hurt your mod more than one $50,000 claim, because frequent accidents predict more accidents.

A bad year stays with you for a while. The mod skips your current policy year and looks at the three years before it (NCCI's window runs 21 to 57 months back). So one bad year can show up in your mod for about three years in a row.

There is no published cutoff. No rating bureau sets a mod above which a PEO or insurer must say no. Each one decides for itself.

Will a PEO take a high‑risk business?

It might. It depends on the PEO, its insurer, your state and your numbers.

How the policy is set up. Many PEOs cover you under a "master policy," which NCCI describes as a policy "written in the name of the PEO covering the leased workers of multiple client companies". Leased workers here means your staff, once the PEO co-employs them. In some states, the PEO instead buys a policy in your company's name, under your own federal tax ID (NCCI calls that a multiple coordinated policy). Your state decides which kind is allowed, and some states have different rules for regular insurance and for the backup plan.

The PEO still makes its own call. Expect it to ask for your loss runs (your insurer's list of past claims) and your mod worksheet (the page that shows how your mod was worked out). Ask what it needs to quote you, and do not assume a PEO accepts any mod.

High-risk industries do use PEOs. California's labor department notes "widespread use of PEOs by small business in the construction industry and other industries with a high risk of workplace injuries".

The warning on that same page. State investigators found that some employers who bought workers' comp from a PEO as part of a bundle "are not covered by a valid workers' compensation policy". And: "The fact that you engage a PEO does not release you from liability." In plain words: if the coverage turns out not to be real, you are still on the hook. So the first step with any PEO is to see the policy.

Compare the whole price. A PEO's quote mixes a workers' comp charge with its admin fee. Line up the total against your best quote straight from an insurer, without a PEO, or from the backup plan. Our PEO cost calculator and the guide to PEO hidden fees can help.

The backup plan in most states: assigned risk

If no insurer will cover you, most states have a plan that will. NCCI defines these as state plans for eligible employers "unable to secure coverage in the voluntary market". The voluntary market just means regular insurers who choose to take you. The plan is also called the "assigned risk market" or the "market of last resort." An insurer is assigned to cover you.

Who can get in. Many states require you to try for regular coverage and be turned down first. You also cannot owe money on a past workers' comp policy. You pay an upfront deposit toward your premium with the application.

What it costs. Surcharges vary by state. Idaho's 2026 rate sheet says: "An Assigned Risk Surcharge of 45% is to be applied to all Assigned Risk policies." That figure is Idaho's alone.

A second surcharge in some states. In states that use it, the Assigned Risk Adjustment Program (ARAP) multiplies the price again for backup-plan employers with a mod of 1.01 or more whose losses ran above what was expected. Unlike the mod, it weighs the size of losses more than how often they happen. In NCCI's example, a business with a 1.13 mod gets an ARAP factor of 1.25, which means 25% more. Each state caps the factor at its own level. ARAP applies only to backup-plan policies, and only in states that have adopted it.

How common it is. Most employers never need it. In the states whose plans NCCI runs, the backup plan was projected at 5.0% of workers' comp premium in 2025, about $643 million, which NCCI calls "the lowest level in 14 years."

The way back out. NCCI runs programs meant to move employers back to regular insurers. One, the Voluntary Coverage Assistance Program (VCAP), searches for a regular insurer as a last-chance effort before you enter the plan. Another, the Take-Out Credit program, gives regular insurers a reason to take you back.

PEOs and the backup plan. NCCI's plan has separate application forms for PEOs and for PEO clients. So being in the backup plan does not by itself rule out a PEO. Your state decides whether it is the PEO's policy or one in your name.

Four states (North Dakota, Ohio, Washington and Wyoming) run their own workers' comp systems, with their own rates, so this section may not apply there. Ask your agent.

California: no backup pool, a State Fund instead

California requires workers' comp even if you have only one employee. For the rest of California's employer rules, see our guide to PEO services in California.

California is one of the states where NCCI's rating plan does not apply. Its mods come from its own rating organization, the Workers' Compensation Insurance Rating Bureau of California (WCIRB), which also compares your actual losses with expected losses.

Instead of an assigned-risk pool, California has the State Compensation Insurance Fund, or State Fund. It was "Established in 1914 by the state legislature" and calls itself "not-for-profit, self-supporting".

State law sets when State Fund can say no. It may decline a risk that does not meet minimum safety requirements, or one "which is beyond the safe carrying of the fund. Otherwise, he or she shall not refuse to insure any workers' compensation risk under state law, tendered with the premium therefor." In plain words: unless one of those exceptions applies, State Fund cannot refuse a business that pays the premium. It is not a promise that everyone gets covered.

Check a PEO's California coverage. Ask to see the policy. Then check that the insurer has a certificate of authority from the California Department of Insurance, which means it is licensed to sell workers' comp in the state.

Illinois and Chicago

Illinois's backup plan is run by NCCI. In 2025 it made up 2.4% of the state's workers' comp premium, an early figure that may change. Illinois backup-plan policies also come under a state program NCCI lists as the "Illinois Contracting Classification Premium Adjustment Program," and Illinois is one of the states where ARAP applies. NCCI lists that program by name only, so ask your agent how it, and ARAP, would affect your quote.

Worked example: one payroll, four prices

Example with made-up numbers, to show how it works. Take a business with $400,000 a year in payroll in Idaho, priced at the state's 2026 rates. The math is simplified: rate times payroll divided by 100, times the mod, times any surcharge.

What one $400,000 payroll costs to insure, Idaho 2026 rates
ScenarioWhat changesYearly premium
A. Office staffCode 8810 at $0.117 per $100, mod 1.00$468
B. House-carpentry crewCode 5645 at $8.152 per $100, mod 1.00$32,608
C. Same crew after a run of claimsMod 1.35 (a made-up debit mod)$44,020.80
D. Same crew in Idaho's backup planPlus the 45% assigned-risk surcharge$63,830.16

Illustration only. Rates per $100 of payroll from the Idaho Industrial Commission's 2026 rate sheet; payroll and the 1.35 mod are made up. Real bills include other fees, discounts and taxes, so your number will differ.

  • From A to B, only the job code changes. Same payroll, about 70 times the premium.
  • From B to C, the mod adds 35%. From C to D, the backup-plan surcharge adds 45% on top of that. Together, D is almost double B.
  • Idaho is one of the states where ARAP applies, so a further factor could apply in D. It depends on the actual losses, so it is left out here. NCCI's own example factor is 1.25.
  • A PEO's price for this crew is whatever its insurer and its own pricing produce. There is no honest way to guess it here, which is why you compare real quotes.

How to get out of the high‑risk bucket

  • Check your class codes first. Inspections change them often, so start there with your agent.
  • Cut how often people get hurt. Small, frequent claims drive the mod more than one big one. Our guides to PEO risk management and PEOs and OSHA cover safety help.
  • Get your mod worksheet. Check that the payroll and claims on it are right.
  • If you are in the backup plan, ask about a way out at each renewal, such as VCAP where it applies.

Industry guides: PEOs for construction and PEOs for trucking.

Questions to ask a PEO when your mod is high

  • Will you cover us on your master policy or on a policy in our name? In which states?
  • Can we see proof of coverage that lists our company by name, and the insurer's license in our state?
  • What do you charge for workers' comp, as a rate per $100 of payroll, for each of our class codes?
  • What safety and claims help comes with it, specifically?
  • If we leave, what happens to our coverage, and to claims from our time with you? See leaving a PEO.

More in our list of questions to ask a PEO.

The bottom line

A PEO is one way to get covered, if it agrees to take you. Your state's backup plan, or State Fund in California, is the other, at a price. Check your codes, see the policy, and compare total costs in writing with your insurance agent.

If you would like help comparing PEOs that may take on your workers' comp, we can connect you with our independent broker, a separate business that gathers quotes from several PEOs. Request a Consultation through our PEO quotes page. It takes several business days, because quotes are built from your payroll, class codes and claims history. The consultation is free to you. If you sign through the broker, he shares part of his fee with us.

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