Health insurance is one of the largest—and fastest-growing—expenses for employers. When costs rise, most business owners default to the same solution they’ve always used: call their insurance broker, shop the market, and brace for another increase. But in recent years, many decision makers have started asking a different question:
Does a PEO save more on health insurance than a traditional insurance brokerage?
The answer depends on how each model works—and what your company actually needs.
How Traditional Insurance Brokerage Works
A traditional insurance broker helps employers purchase a health insurance plan directly in the open market. The employer owns the policy, manages renewals, and absorbs rate increases year over year.
While brokers can shop carriers and negotiate to some extent, small and mid-sized businesses face clear limitations:
Limited leverage with carriers
Fewer plan design and funding options
Annual renewal cycles with little long-term cost control
Rising premiums driven by small group risk pools
For many employers, even a “good” renewal still means paying more for the same coverage.
How a PEO Approaches Health Insurance
A Professional Employer Organization (PEO) operates differently. Through a co-employment model, your employees become part of a much larger benefits pool, often thousands or tens of thousands of employees nationwide.
This scale gives PEOs access to:
Enterprise-level health plans
More competitive underwriting
Alternative funding arrangements not available to small groups
Greater plan choice and flexibility
Instead of your company standing alone in the insurance market, you’re joining a much larger group with stronger negotiating power.
Where The Real Savings Come From
The biggest misconception is that savings only come from lower premiums. In reality, PEO-related savings often show up in multiple ways:
Lower employer contributions for similar or better plans
Slower year-over-year increases compared to the small group market
Reduced administrative costs tied to benefits management
Improved employee retention, lowering turnover-related expenses
In many cases, companies switch to a PEO and improve benefits without increasing total spending, a difficult outcome to achieve through traditional brokerage alone.
When a Traditional Broker May Make Sense
Traditional brokerage can still be effective for:
Very small companies with minimal benefit needs
Organizations with unique plan designs already optimized
Employers who want full internal control over benefits administration
However, even in these cases, cost volatility remains a challenge.
When a PEO Often Wins on Cost
PEOs tend to provide stronger savings for:
Companies with 10–250 employees
Employers facing double-digit renewal increases
Businesses struggling to compete for talent
Organizations looking for predictable benefits costs
Beyond insurance, PEOs also integrate payroll, HR, compliance, and workers’ comp, creating additional indirect savings traditional brokers don’t address.
The Bottom Line
So, which saves more on health insurance: a PEO or a traditional insurance brokerage?
For many growing companies, a PEO delivers greater long-term value by combining scale-driven health insurance savings with administrative efficiency and risk reduction. The key is not choosing one blindly—but comparing both side by side.
Curious what you might be missing?
A short PEO cost analysis can show where savings and efficiencies really exist and whether a PEO is the right fit for your business.
📩 Email Sales@BACbenefits.com or call 321-441-9056 to schedule your free PEO cost analysis