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Small Business Health Insurance: Exploring PEOs
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Small Business Health Insurance and the PEO Solution

By Gerald Diddle on Apr 16, 2025
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Navigating small business health insurance can feel like an uphill battle — between rising costs, complex regulations, and limited plan options, it’s no wonder many small employers feel stuck. But offering affordable, high-quality health insurance isn’t out of reach. In fact, it may be one of the smartest investments you can make to attract and retain top talent.

In this post, we’ll explore the best small business health insurance options, including how partnering with a certified professional employer organization (PEO) can give you access to Fortune 500-level benefits at a price that works for your business.

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Why Small Business Health Insurance Matters

Brought into the spotlight by the Affordable Care Act (ACA), offering benefits,  like small business health insurance,  has long been a source of frustration for business owners. Under the ACA, U.S. businesses with fifty or more full-time employees for one year or more are required to offer health insurance. 

While the ACA requires health insurance for companies with 50 or more full-time employees, many smaller businesses still offer coverage voluntarily. Why? Because it’s a smart business move.

Providing health insurance helps you:

  • Compete for top talent

  • Improve retention

  • Boost employee satisfaction and productivity

According to the National Federation of Independent Business, 65% of small businesses that don’t offer insurance say cost is the biggest barrier. But there are more affordable solutions than many realize.

RELATED: Four Reasons to Offer Employee Health Benefits (Even if You're Not Legally Required To) >>

What Are Your Options for Small Business Health Insurance?

Whether you’re a five-person team or a company on the verge of growth, these are the most common health insurance options for small businesses:

Group Health Insurance Plans

Traditional plans offered through private insurers or the Small Business Health Options Program (SHOP).

Health Reimbursement Arrangements (HRAs)

Tax-advantaged accounts you fund to reimburse employees for their own insurance.

Joining a PEO

Partnering with a professional employer organization gives you access to large-group health plans typically reserved for big companies — often at lower rates.

RELATED: PEO Insurance - The Key to Affordable Employee Benefits >>

How Do Small Businesses Afford Quality Health Benefits?

Partnering with a PEO offers employers a way to afford quality small business health insurance. PEOs provide services to between 156,000 and 180,000 small and mid-sized businesses, providing access to affordable health insurance to millions of employees.

When small to medium-sized businesses partner with a PEO, they have the opportunity to offer their employees access to Fortune 500-level employee benefits like medical insurance, dental and vision care, life insurance, retirement saving plans, job counseling, adoption assistance, educational benefits and more — all made more accessible and affordable through PEO insurance.

With a PEO, you’ll receive much more than just affordable rates and a variety of health insurance options. PEOs handle a full range of HR services. Think of it as your very own team of experienced HR professionals, just outsourced instead of in-house. PEOs process payroll, manage recruiting, compliant hiring, onboarding, employee training, HR compliance, workers’ compensation administration and far more.

What is a Certified PEO?

How PEOs Lower the Cost of Small Business Health Insurance

Through a model called co-employment, PEOs bundle your employees with those of other small businesses to create a large risk pool. This allows access to premium benefits — including health, dental, vision, life and disability insurance — at a price that’s far more affordable than going it alone.

And PEOs do more than just lower premiums. They also:

  • Handle all plan administration and paperwork

  • Ensure ACA and IRS compliance

  • Manage payroll deductions and reporting

  • Support your employees with questions and onboarding

RELATED: PEO for Health Insurance? Here's Why Everyone Is Talking About It >>

What Is Co-Employment?

According to The National Association of Professional Employer Organizations (NAPEO), co-employment is the contractual allocation and sharing of employer responsibilities between a PEO and its client. In a PEO partnership arrangement, the client’s employees are technically employed by two entities: the business owner and the PEO.

The client-employer maintains control of all business decisions and operations, while the PEO, or co-employer, manages human resources tasks, including remitting wages and withholdings for the client's employees and issuing Form W-2s for the compensation paid under its Employer Identification Number. 

By serving as an employer of record, a PEO is able to offer low-cost options for small business health insurance to your employees using rates calculated for a much larger employee pool than the employer-client would be able to tap into on its own. For this reason, partnering with a PEO is a popular method of offering the lowest rates for small business health insurance. You can read more about the role of the PEO here.

RELATED: What is Co-Employment? (Yes, You're Still the Boss) >>

FAQs About Small Business Health Insurance

What qualifies as a small business for health insurance purposes?

Generally, businesses with fewer than 50 full-time employees are considered small businesses and are not legally required to offer health insurance — but many choose to.

How much does small business health insurance cost?

Costs vary by location, plan type, and number of employees. Partnering with a PEO often reduces premiums by giving you access to lower large-group rates.

What are the benefits of offering health insurance if I’m not required to?

Offering health coverage makes your business more attractive to job seekers, increases employee loyalty, and can even improve productivity and morale.

Axcet HR Solutions Makes Small Business Health Insurance Easy

As your certified PEO, Axcet HR Solutions offers:

  • Access to top-tier health plans through our large-group insurance model

  • Fortune 500-level benefits at a rate small businesses can afford

  • A dedicated benefits consultant who knows your team and guides you every step of the way

You don’t have to spend hours comparing plans or navigating red tape. We’ll help you choose the best small business health insurance for your team — and take the weight off your shoulders.

Explore our employee benefits management services >> 

Read more about going the PEO route for small business health insurance here >>

PEO small business employee benefits

Written by Gerald Diddle

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