How to Save Costs and Admin Time With A PEO Health Plan

Small and medium-sized businesses often face steep competition from larger enterprises when it comes to attracting and retaining top talent. To stand out, employers must offer more than competitive salaries—they also need to have a compelling benefits package. A key component of this is great healthcare.

According to a 2024 survey by Forbes, two-thirds of employees consider health insurance to be the most important employment benefit that companies can provide. However, it is also one of the costliest. In 2024, the average annual cost of single coverage was estimated at $9,000 USD, with a family plan exceeding $25,000.. Founders and HR teams need to balance these costs against plan limitations and employees’ expectations.

One possible solution is to partner with a professional employer organization (PEO)—an HR model that acts as a co-employer and unlocks access to employment benefits at prices typically reserved for larger organizations. In this article, we break down how PEO health plans can boost your benefits package while saving you costs and admin time.

Health insurance buying channels: A practical overview

When it comes to purchasing health insurance, employers have several options available to them:

• Directly from insurers: This involves finding and purchasing a group plan directly through an insurance company
• Health insurance marketplaces or exchanges: These are private or government-led platforms where employers can compare, select, purchase, and sometimes manage their healthcare plans
• Insurance brokers or agents: This option involves third-party experts who help evaluate plans, guide decision-making, and manage the enrollment process for a fee
• PEO health plans: PEOs provide large-group insurance rates for their clients, alongside HR, payroll, tax, and compliance services

Here’s a summary of the key differences to help you compare types of purchasing channels:

What is a PEO health plan?

A PEO health plan is a group health insurance plan that becomes available to companies that engage PEO services. When partnering with a PEO, businesses enter into a co-employment agreement in which the PEO assumes responsibility for HR, payroll, administrative, and compliance functions, while the client manages the business’s daily operations. Because PEOs serve multiple clients, they can pool workforces to negotiate access to large-group benefits through economies of scale. This arrangement allows the employees to choose from a variety of plans with different co-pays and deductibles, and select the coverage that best suits their needs.

What does a PEO health plan typically include?

Many PEOs offer major medical coverage, widely considered the strongest foundational health insurance coverage a US employer can provide. These plans are ACA-compliant, meaning they cover a wide range of essential medical services, including hospitalization, surgeries, preventive care, and more. In addition to physical health benefits, ACA-compliant plans also include mental health services such as therapy, counseling, and psychiatric care.

Add-ons

Aside from competitive core health plans, PEOs typically offer health insurance add-ons that provide employees with financial protection for various medical expenses. Popular options include:

• Dental and vision coverage: An optional add-on that covers oral and eye health treatments, including exams, procedures, and corrective lenses
• Critical illness insurance: Supplemental coverage that pays a lump sum if the beneficiary is diagnosed with a covered illness
• Accident insurance: Provides a lump sum payout if the employee suffers an injury due to a covered accident
• Hospital indemnity insurance: Pays a fixed amount upon admission to a hospital, and a daily benefit for each additional day spent in the hospital (up to a predefined limit)

Healthcare savings accounts

Healthcare savings accounts are another type of benefit that PEOs can offer employees. These are tax-advantaged savings accounts that help employees set aside pre-tax money to pay for qualified medical expenses. Common examples of these are:

• High-Deductible Health Plan (HDHP) and Health Savings Account (HSA): HDHPs feature lower monthly premiums but higher deductibles, and are often paired with HSAs—tax-free accounts for saving and spending money on qualified medical expenses
• Flexible Spending Account (FSA): This account also allows employees to save pre-tax money for medical or childcare costs, but many include a ‘use-it-or-lose-it’ clause for each year

HR compliance and administrative tools

With a PEO co-employment model, businesses receive more than an expanded portfolio of health insurance options. PEOs also take on benefits-related administrative and regulatory functions, including:

• Managing healthcare compliance: PEOs ensure alignment with federal, state, and local laws, including compliance with the ACA, Consolidated Omnibus Budget Reconciliation Act (COBRA), and the Health Insurance Portability and Accountability Act (HIPAA)
• Handling employee enrollment and documentation: PEOs take on all back-office tasks related to benefits management, including enrollment, eligibility tracking, and maintaining up-to-date employee records
• Centralized HR support and self-service tools: PEOs typically offer a centralized help desk for benefits-related questions, while also equipping employees with self-service portals to independently view, update, and manage their health plans

PEO health plans vs. regular small group plans

When evaluating your options for health benefit plans, it's important to consider not just the cost but also the coverage flexibility, administrative burden, compliance requirements, and employee experience. Here’s how traditional group plans and PEO health plans compare:

Who should consider a PEO health plan?

For fast-growing businesses with multiple competing priorities, partnering with a PEO can be an advantageous way to access high-quality benefits and streamline back-office tasks. Consider a PEO health plan if:

• You need predictable, cost-effective health benefits that scale with your team, without additional hidden fees or unexpected rate hikes
• You are seeking to boost your competitive edge in the talent market or improve employee retention without adding operational complexity
• You want to reduce the risk and administrative burden of complying with ACA, HIPAA, and COBRA
• Your workforce spans multiple states, and you’re unsure how to remain compliant across jurisdictions
• You lack a dedicated HR team but expect rapid growth, and can't afford benefits errors or delays

See also: PEO Services: A State-by-State Guide for US Employers

How can PEO health plans save you time and costs?

A PEO co-employment model may involve some upfront costs and contractual commitments, such as a monthly fee and a service agreement. However, over time, PEOs often deliver significant savings in both cost and administrative effort. When it comes to health plans and employee benefits, there are several ways in which partnering with a PEO can bring you value:

How can a PEO health plan help you cut costs?

A PEO partnership offers small and mid-sized businesses several effective ways to cut costs and avoid legal penalties or unexpected fees:

• Large-group rates: PEOs pool employees from multiple small businesses, giving you access to health insurance rates typically reserved for large employers
• Minimized legal risks: PEOs take on benefits compliance responsibilities, helping businesses avoid costly fines and regulatory risks by ensuring alignment with ACA, HIPAA, and COBRA requirements
• Fewer claim disputes: PEOs manage claims processing on behalf of your employees, helping them resolve issues faster, avoid out-of-network charges, and minimize costly billing errors
• Predictable, transparent pricing: Choosing a PEO provider that offers transparent and predictable bundle pricing can reduce unexpected budget strain and improve your long-term financial planning
• Reduced broker and third-party admin fees: PEOs handle benefits negotiation, admin, and enrollment, eliminating the need to pay separate brokers, third-party administrators, or consultants

How can a PEO health plan save you time?

PEO health plans offer a cost-effective solution for enhancing your benefits package while spending less per employee than with a traditional small-group plan. However, partnering with a PEO delivers more than just enhanced benefits. Here are some key ways in which a co-employment relationship with the right PEO can save you valuable time:

• Streamlined, centralized benefits administration: PEOs handle all benefits-related admin, from plan selection support for employees to managing open enrollment periods, qualifying life events, and other relevant responsibilities throughout the year
• Compliance tracking: PEOs take over time-consuming compliance tasks—such as tracking employee benefits eligibility and managing regulatory requirements—so your team can focus on more strategic work
• Optimized onboarding: PEOs’ systems typically integrate HR, benefits, and payroll functions, allowing faster employee setup and benefits enrollment
• A single point of contact: PEOs provide a unified source for all benefits-related services, cutting down on the time cost of managing multiple vendors, brokers, or legal experts
• Employee self-service portals: PEOs typically equip employees with self-service portals to manage key aspects of their benefits and the enrollment process, reducing the HR workload and enhancing the overall employee experience
• Faster issue resolution: PEOs' in-house support means employee issues get resolved quicker, reducing downtime and complaints

Your PEO provider questions checklist: Choosing the right partner for your health plan needs

Evaluating different PEO providers can be challenging, especially when trying to understand their full range of services and pricing models. To help you navigate the decision-making process, we’ve created a table of essential questions that you can use to compare providers, clarify what’s included in their bundle, and identify the partner best equipped to support your team’s health coverage needs:

Learn more: How to Choose the Best PEO for Health Insurance.

Boost your healthcare benefits with Deel PEO

Health insurance is essential for attracting talent, but premium plans are often out of reach for growing businesses focused on cost control.

With Deel PEO, you gain instant access to 60+ domestic benefits plans and the Aetna International benefits plans—exclusive to Deel. By partnering with Deel, you can provide extensive, high-quality coverage for your US teams without the cost of a Fortune 500-level package.

Deel PEO is not just a benefits and admin service but a strategic solution trusted by more than 35,000 clients worldwide. Our fully in-house infrastructure saves you time and money by providing you with:

• Extensive benefits offering, end-to-end admin support, and seamless compliance management
• Comprehensive payroll administration
• Built-in compliance tools that streamline regulatory processes in all 50 states
• Automated tax processing and filing at the federal, state, and local levels
• Transparent pricing with no hidden costs or additional fees
• And more

Discover how Deel PEO helps you reduce your benefits and admin costs. Book a demo to learn more.