Why PEOs Beat a Small Business Health Insurance Broker Hands Down

Navigating health insurance options can feel overwhelming for small business owners. From choosing the right plan to managing employee enrollment and staying compliant with ever-changing regulations, the process is anything but simple.

Two popular options for small businesses are working with a small business health insurance broker or partnering with a professional employer organization (PEO). Both provide valuable benefits, but understanding their differences is key to deciding which solution best fits your needs.

In this article, we’ll explore how the small business health insurance broker and PEO compare when it comes to employee health insurance, offering insights that will help you make the best choice for your business.

Small Business Health Insurance Broker vs PEO

On the front side, both a PEO and a small business health insurance broker guide you through the process of selecting health insurance plans and enrolling your employees.

But their similarities end after enrollment is completed.

Here's a deeper look into the pros and cons of each:

Small Business Health Insurance Broker

A small business health insurance broker is a licensed professional who acts as an intermediary between your business and health insurance companies. They assist in selecting health insurance plans tailored to your company's requirements and budget.

Brokers provide expertise on available plans, carriers and legal obligations, ensuring you make informed decisions.

Pros

• Expert plan navigation

  Small business health insurance brokers possess in-depth knowledge of the healthcare market, helping you evaluate and select plans that align with your organization's needs.

• Aligned representation

  Brokers work on your behalf, representing your business's best interests when dealing with insurance carriers.

• Strategic cost analysis

  A broker for small business health insurance identifies and assesses health insurance options and their associated costs, aiding in cost-effective decision-making.

• Tailored plan selection

  They recommend plans that best meet your company's and employees' needs and budget constraints.

• Benefits education support

  Brokers assist in educating your employees about available plan designs and associated costs.

• Enrollment assistance

  Health insurance brokers facilitate the enrollment process, ensuring employees are signed up for their chosen plans.

Cons

• Post-enrollment handoff

  After enrollment, small business health insurance brokers typically step back, leaving the ongoing administration of health benefits to your company.

• Ongoing premium commissions

  Brokers earn commissions from insurance carriers based on the premiums you and your employees pay. This commission structure continues as long as the plan is in place, even if the broker's active involvement diminishes post-enrollment.

PEO

A professional employer organization (PEO) is a company that partners with small and mid-sized businesses to handle human resources, employee benefits, payroll, compliance and risk management.

PEOs operate under a co-employment model, which allows them to pool employees from all their clients into a single, larger group — a structure that forms the foundation of PEO insurance and enables access to Fortune 500-level benefits at a rate they can afford. This is a significant advantage that small business health insurance brokers or stand-alone plans often cannot provide.

In addition to health insurance, PEOs provide ongoing administrative support, compliance expertise and dedicated HR resources, allowing small business owners to focus on growing their companies.

Now, let’s explore the pros and cons of partnering with a PEO for health insurance and HR support.

Pros

A PEO provides all the advantages of a small business health insurance broker—and then some. When you partner with a PEO, you gain access to the same expertise in health insurance plan selection and employee education, along with added benefits that go far beyond what brokers typically offer.

The Shared Benefits of PEOs and Health Insurance Brokers for Small Business

• Expert plan navigation

  PEOs understand the available plans, carriers, and legal requirements. They use their knowledge of the health care market to evaluate which options are the best fit for your organization. 

• Aligned representation

  They work with insurance companies on your behalf, always representing your business’ best interests—not the insurers’. 

• Strategic cost analysis

  PEOs identify and evaluate health insurance options and their associated costs, helping you make informed, budget-conscious decisions. 

• Tailored plan selection

  Recommendations are customized to meet your company’s and employees’ specific needs and budgets. 

• Benefits education support

  They assist employees in understanding their plan options, helping them make informed decisions. 

• Enrollment assistance

  PEOs handle the paperwork and sign employees up for the plans they choose.

Additional Benefits Unique to PEOs

• Elite benefits

  PEOs provide access to affordable, Fortune 500-level employee benefits—a level of coverage brokers cannot typically offer. 

• Long term partnership

  Unlike brokers, PEOs stay with your business for the long haul, supporting your company and employees year-round. 

• Comprehensive HR support

  Every client receives a dedicated HR benefits consultant who navigates complex health insurance requirements, ensures legal compliance and manages all related paperwork. 

• Administrative relief

  PEOs take on the ongoing burden of plan administration, including claims support, premium collection and status changes, freeing up your time to focus on running your business.

• Value-driven pricing

  Paid through an administration fee, often based on a percentage of a client’s total payroll or a flat fee per employee. The fee is not tied specifically to clients’ insurance premiums, as small business health insurance brokers' fees are. 
  
  With the fee, employers typically receive a full suite of expert services, including comprehensive human resources, payroll administration, workplace safety consulting, risk management support and compliance, in addition to optional employee benefits and total benefits administration. 

Cons

• Perceived lack of control

  Some businesses may feel a loss of control due to outsourcing HR functions. However, partnering with a local PEO can expand your team's capabilities by providing access to dedicated professionals, effectively acting as an extension of your in-house team.
  

• Security concerns

  Sharing sensitive payroll and benefits information with an external company may raise security concerns. Reputable PEOs mitigate this by implementing robust security measures, including advanced redundancy systems and emergency backup plans, often surpassing what small businesses can implement independently.
  
  RELATED: Top 3 Security Measures that Ensure Your Payroll Partner Treats Your Data Like It’s Theirs >>
  

• Change resistance

  Introducing a PEO may initially meet resistance from employees accustomed to existing systems. This hesitation often turns to appreciation once they experience direct access to HR consultants, payroll administrators, and user-friendly online portals for managing their information.

How a PEO Outshines a Small Business Health Insurance Broker

For many small businesses, especially those unable to afford competitive plans independently or through a broker, partnering with a PEO offers significant advantages:

Affordable, Fortune 500-level coverage 

Through the co-employment model, PEOs aggregate employees from multiple small and mid-sized clients into a single, larger group - often including thousands of client worksite employees. This collective size increases buying power with insurance carriers, leading to more desirable and affordable health care options.

In contrast, small business health insurance brokers work on behalf of individual businesses, which may not yield the same level of bargaining power. Carriers view smaller companies and their smaller employee groups as higher risk. They price their premiums higher to cover that small group risk.

RELATED: Should Your Small Business Offer Health Insurance? >>

It’s simple math – the smaller the group, the higher the risk and the higher the premiums.

So, unlike a small business health insurance broker, a PEO enables small businesses to leverage group plan pricing and offer their employees the same kinds of high-quality benefits typically only available at larger Fortune 500 corporations – coverage their employees will understand, value and use and which they almost certainly could not afford otherwise.

That helps level the playing field for smaller employers, allowing them to make more competitive job offers that attract and retain highly qualified talent. 

Ongoing, personalized expert support 

Unlike brokers, whose involvement often diminishes post-enrollment, PEOs provide extensive, continuous support. They manage employee benefit plan administration, handle employee inquiries, resolve claims issues and ensure compliance with evolving regulations, allowing business owners to focus on core operations.

RELATED: Small Businesses, Health Insurance and the PEO Option >>

PEO benefits administration includes: 

• Setting up automatic paycheck deductions for premium payments; 
  
  
• Collecting and submitting premiums to the insurance provider, always meeting premium payment deadlines and ensuring that correct payments are made;
  
  
• Paying claims and other bills; 
  
  
• Working directly with employees as needed to help resolve claims; 
  
  
• Handling changes in employees’ status, such as marriage or divorce, a spouse’s death, a child’s birth or a change in residence;  
  
  
• Determining benefits eligibility for new hires; 
  
  
• Working with eligible new employees to make sure they understand their benefits options and adding them to their preferred plans; 
  
  
• Adjusting the amount owed and paid to the insurance provider if an employee leaves the client company; and
  
  
• Balancing, reconciling and reviewing employer accounts to ensure accuracy. 

A PEO, like Axcet, delivers specialized, personalized expertise that alleviates the heavy administrative burden employee benefits represent, saving client companies countless hours and major inconveniences and headaches.

A burden they would still carry had they partnered with a small business health insurance broker. 

Choosing Between a Small Business Health Insurance Broker and a PEO

Choosing between a small business health insurance broker and a PEO depends on your company's specific needs and resources. Brokers offer valuable expertise in plan selection and initial enrollment but may leave ongoing administrative responsibilities to your team.

PEOs, on the other hand, provide a holistic solution, offering comprehensive benefits, continuous support, and administrative relief, making them an attractive option for small businesses seeking to streamline their HR and benefits processes.

By carefully evaluating the pros and cons of each option, you can determine the best approach to managing your company's health insurance and HR needs.

RELATED: Avoid Making the Nine Most Common Employee Benefits Mistakes >>

Axcet HR Solutions Can Help

If you’re ready to relieve the stress that comes with providing employee health insurance benefits and stop worrying about annual renewal negotiations, benefits plan administration, legal regulations and other health insurance complexities, schedule your free consultation with Axcet HR Solutions today (and skip the added work that comes with using a health insurance broker).

Axcet was founded in 1988 in Kansas City and remains headquartered in the metro area while serving businesses coast to coast with the same local, personalized touch Kanas City businesses have known and appreciated for over 35 years.

Axcet's employee benefits experts can help you navigate from beginning to end the process of providing benefits your employees will appreciate and use while giving back time you can allocate to focus on growing your business.