Understanding a Health Insurance PEO vs a Broker


Health insurance is probably one of these most important benefits and employee can earn aside from salary and retirement income. Health coverage significantly helps offset the costs of medical coverage if not outright pay for it entirely, but the benefit is typically only provided to full-time employees. No surprise then, employees value it significantly, especially for entire family coverage and projection for runaway medical costs otherwise.

Robust health packages have been, historically, effective in attracting top-skilled talent and, in some cases, employees value good health plans over higher salaries as well. Many argue the point that additional income can be earned on the side, but health coverage is much harder to substitute outside of primary employment.

Employer Market Choices Make a Difference

On the employer side, finding the right health plan can be a bit of a challenge, especially for small companies and mid-size operations. In this regard, various market tools come into play, whether using exchanges or insurance brokers as well as working directly with plan providers. Many times, smaller companies find better packages at lower cost or comparable options for less through brokers and exchanges versus a direct provider, mainly because providers are tuned to work with big corporations instead. This, of course, asks the question: which option is better between a professional employer organization, i.e. a PEO vs health insurance broker?

Both a PEO and an insurance broker can help companies find health plan packages for their staff. The difference comes in the market options available to each and how the costs are spread for the help. The differences in some respects may be subtle and in other cases very noticeable.

The insurance broker is a third party who works as a middleman establishing contract relationships between clients and insurance providers. Brokers are not agents; they are independent businesses who understand the specific requirements of health plan coverage contracting, and their expertise comes in their ability to match the right client to the right provider. The benefit to the provider is that the broker brings client types the provider specifically wants most. For the client, the broker helps find coverage plans that might not be “visible” to the client otherwise and affordable for their situation.

The downside of the broker is that all their effort and work is only on the front end, establishing the contract. The broker effectively disappears afterwards and issues are between the client and provider. Brokers come as an added cost. They have a fee involved to do their work, and that commission is paid from the premium the provider charges the client. So, up front or behind the scenes, the client will pay for the broker’s services.

The PEO also has a broad range of awareness in regard to what packages are available on the market for health coverage. They provide vetting of packages, costs and client needs, and help businesses find the right package from providers. A key difference, however, is that the PEO represents the client versus just focusing on making a match. The PEO also provides ongoing support to the business and its employees in how to sign up for plan coverage and what the details involved are.

PEOs can also give businesses help with management of a health plan once it is chosen and executed. That includes administration, ongoing support with the client and staff as they grow and change, navigating insurance need changes, and help with employee education. PEOs are compensated through administration fees or a flat fee per employee, depending on the agreement with a client company.

Working With an Advocate vs Just a Match

Small businesses are no different from larger companies; they are expected to provide health benefits and coverage to stay competitive in their markets. However, finding the right plan doesn’t need to be a leap across the Grand Canyon or a blind trust in a broker who only provides help until the plan is bought. Instead, with a PEO providing support, a business can find the right health plan package and receive expert help in its administration as well. That provides ongoing guidance, education and cost savings, which smaller businesses need to maintain overall growth momentum.