Private Brokerage versus Professional Employer Organization (PEO)

When it comes to choosing your companies health benefits—choose your consultant wisely.

When it comes to choosing your companies health benefits—choose your consultant wisely.

Employee benefits are one of the largest cost’s employers in the United States encounter.  Deciding which benefit options will serve your business best now and in the future isn’t the smallest decision.

From carriers to contributions to plan choices — there’s a lot to consider.  Depending on whether you work with a PEO, private brokerage or go direct to the insurance carrier — that decision is guided by their advice. 

Which solution will you leverage for your employee benefit needs?

The first step is knowing all your options. As a small to mid-sized business owner, there are three main options:

  1. Going direct to an insurance carrier
  2. Hiring a Professional Employer Organization (PEO)
  3. Working with a private brokerage

The decision ultimately depends on your organizational structure. Maybe cost is your only concern, or perhaps a more personal experience is what you’re looking for. Whatever your priority is when it comes to choosing your company’s health insurance benefits, there are pros and cons of each option.

1. Going direct to an insurance carrier

An insurance carrier like UnitedHealthcare and Blue Cross Blue Shield controls the underwriting, claims and pricing of the insurance policies they offer. 

If you currently go direct to an insurance carrier for your employee benefits, you probably have never worked with a private brokerage before.

For employers with less than 50 employees, group health coverage insurance costs the same no matter where you shop.  Why?  Because the rates are based on your age, geographic location and other qualifying conditions under the Affordable Care Act a.k.a Obamacare.

One condition is when you purchase your benefits with an insurance carrier — you’re on your own when it comes to managing employee benefits for your business.

That means services typically performed by a brokerage are completely in your hands.  These services include: 

  • Communicating with the insurance carrier on your behalf
  • Providing post-sale support throughout the year
  • Adding or removing employees from your plan
  • Assisting with open enrollment
  • Employee maintenance including an explanation of benefits to your new hires
  • Compliance support

Not to mention when you go direct to a specific carrier, you are subject to that carrier’s plan offering. A broker will typically shop benefit options from multiple carriers and help you narrow down plans to find the best fit for your company.

Another interesting fact: there’s no service fee for going through a broker. Working with a broker means having a personal assistant for your employee health insurance benefits (without paying a penny extra).

Insurance carriers simply can’t provide the one on one assistance that brokers do. That’s why carriers appoint thousands of brokers to sell their products at no additional cost to you. So if the cost is the same, and brokers will do the work for you, why not get the added support? 

2. Hiring a Professional Employer Organization (PEO)

Professional Employer Organizations (PEOs) can charge anywhere from 3% to 15% of your employees Gross Payroll in exchange for their services. The cost of a PEO may seem like a solution for your business today—but it’s not a long-term solution. Depending on the size of your company this fee could add up quickly.

When you decide to hire a PEO, you enter a “co-employment” relationship between your company and the PEO itself.

What does co-employment mean?

When you enter a co-employement relationship with a PEO, the PEO literally hires your employees along with the employees of other companies like yours to form one large group. This is beneficial for small groups looking to utilize large group benefits that would otherwise not be available to companies of that size. basically one company (the PEO) owns all these separate companies.

The more employees you have, the less you’ll end up paying for benefits like workers compensation and retirement plans. But when it comes to health insurance a lower price tag may only apply during your first year with the PEO. When your employees are hired by a PEO along with other small businesses’ employees, you enter a contractual agreement stating that the PEO: 

  • Reserves a right of direction and control of the employees with respect to certain matters
  • Shares or allocates employment responsibilities with the client in a matter consistent with the client maintaining its responsibility for its product or service
  • Remits wages and withholdings of the client’s workers
  • Issues Form W-2s for the compensation paid under its Employer Identification Number
  • Reports, collects and deposits employment taxes with local, state and federal authorities

So when your employees complete their annual tax return, the name of your company will not appear on their W2. For example, if Insperity was your PEO, Insperity would be the employer name on your employees W2. 

Day to day activities are still your control such as who gets hired and who gets fired. But overall PEOs come with their fair share of limitations, such as a lack of transparency.

With a PEO, your benefits, payroll and taxes are bundled, so the breakdown and transparency of what you are paying is hard to come by.

Your broker can provide you an exact cost breakdown of your benefits, from employer contributions to individual employee payments.

And because so many of these services are bundled, it’s not easy to leave your PEO. Think about your internet provider at home. You have an all-in-one solution that bundles internet, cable and maybe even your phone. It takes a lot of time to unbundle. When you leave your PEO, you have to find a replacement for your payroll administration, Human Resource services and taxes.

Health insurance plans available through a PEO are based on the number of employees the PEO you choose is employing. PEOs often work with a single carrier and offer two to four different plan options.

3. Working with a private brokerage

A good insurance broker will shop the market each year to find the best plans for your business.

A PEO will not shop for coverage outside of what they offer because their main goal is to drive membership for their PEO plan.

In addition, your PEO may not be able to answer specific benefit related questions. PEOs typically provide online support only for you and your employees. When working with a broker you get a designated account representative to answer your questions and your employees questions.

Brokers Educate

Most insurance brokers will host in person enrollment meetings to better educate your employees. Lack of employee education on healthcare options can lead to a lower utilization of benefits. And after you’ve spent your money to make these benefits available, you want to make sure your employees are using them.  

Insurance brokers save you money on premiums by teaching your employees to visit quick care facilities instead of going to the ER and to take advantage of the benefits that are built into their health plans like annual physical exams and mental health service. Don’t assume they know!

Your employees may be better off physically and financially with their group benefit versus shopping in the individual market. By educating them, you’re increasing their appreciation too.

Keeping up with Compliance

A big part of owning a business is knowing the rules and regulations that apply to you and following them.  With the rules constantly changing, it’s hard to keep track of what rules are still being enforced.  You’ve probably avoided compliance in the past because you simply don’t have time to sort through boring legal documents. But this could be an expensive mistake.    

In fact, the consequences for not complying can end up costing your business thousands of dollars.

For example: One provision under the ERISA law requires employers to provide a Summary Plan Description also known as plan SPDs to participants (your employees) within 30 days of their request. If you fail to do so you could be issued a fine of $110/day.

Most private brokerages should be able to help you with these issues (or consider switching to a new one if he/she is not able to help). It’s not worth the risk. 

Service Service Service

Brokers work with you, around your schedule to come up with the best health insurance benefits solution for your business. At IXSolutions we believe every business, no matter the size or yearly revenue, should have access to affordable health and ancillary insurance benefits.

We handle your employee benefits administration process, offer more choices and save you money. How? Through our service focused culture and one stop shop employee benefits platform.

With our platform, your employees can enroll into a health insurance plan with the click of a button, so you can go back to doing what you do best — managing your business. 

Summary of our services:

  • All-in-one employee benefits platform 
  • Hassle-free HR & benefits administration 
  • Assigned support team available year-round
  • Affordable health insurance options 
  • Dental, vision, life, disability & temporary health
  • Online enrollment for every plan
  • HSAs, HRAs and FSAs

Private Brokerages vs. PEOs – Pros and Cons

When deciding between private brokerages and Professional Employer Organization to assist with your company’s employee health insurance benefits, it’s essential to consider the advantages and disadvantages of each option. Now that we have a basic understanding of the types of insurance consultants let’s take a closer look at the pros and cons of using Private Brokerages and PEOs.

Private Brokerages offer a tailored approach that is hard to beat. They provide personalized, expert advice tailored to your business’s unique needs. This enables you to craft a benefits package that aligns seamlessly with your organizational objectives. Private brokers also collaborate with multiple insurance carriers, granting you access to many benefit plans. This diversity empowers you to find cost-effective, comprehensive solutions that suit your requirements. 

What’s more, they excel at negotiating favorable terms with insurance carriers, potentially reducing your company’s expenses. While insurance brokers may charge fees or commissions for their services, these costs are usually outweighed by the substantial benefits they bring.

PEOs, on the other hand, offer a streamlined HR approach that can significantly reduce administrative burdens for businesses. They can handle various HR functions, including benefits administration, payroll, and compliance, providing you with more time to focus on core business activities. 

Additionally, PEOs often grant access to group insurance plans, leveraging the collective purchasing power of multiple businesses to secure potentially better rates and benefits. They excel in staying up-to-date with complex employment laws and regulations, ensuring your company remains compliant. However, partnering with a PEO may entail relinquishing some control over certain HR functions and benefits decisions. Additionally, they may offer a standardized approach to benefits, which may not fully align with your company’s unique requirements.

How to Choose the Right Solution for Your Business

Choosing the right benefits solution for your business requires careful consideration. Here are some tips to help you make an informed decision:

Assess Your Needs

Start by evaluating your company’s specific needs, including the size of your workforce, budget constraints, and the level of control you want over benefits administration.

Compare Costs

Compare the total health insurance costs of using a private brokerage, PEO, or going directly to an insurance carrier specially for small business owners. Consider not only the fees but also the potential to save money and the added value.

Review Services

Understand the range of services offered by each option. Are you looking for assistance beyond benefits, such as HR services? Ensure the chosen solution aligns with your broader HR goals.

Ask for References

You can request references and case studies from both private brokerages and PEOs. Speak with other businesses that have used their services to gauge satisfaction.

Consider Long-Term Goals

Consider your company’s long-term growth, business operations and how your chosen benefits solution can adapt to changing needs.

Consult with Experts

Seek advice from financial advisors, legal experts, or HR consultants who can provide objective insights into which option best suits your business.

Case Studies

Case Study 1: TechSolutions Inc.’s Journey with a Private Brokerage

TechSolutions Inc., a mid-sized technology firm, faced challenges in effectively managing its expanding employee benefits program. The HR team was overwhelmed with administrative tasks, and employees were becoming increasingly dissatisfied with their benefit options.

TechSolutions Inc. partnered with a private brokerage known for its expertise in tailoring benefits packages. The brokerage comprehensively analyzed TechSolutions’ needs, negotiated competitive rates with insurance carriers, and provided ongoing support. By leveraging private brokerage expertise, TechSolutions Inc. identified cost-effective benefit options that significantly reduced their overall benefit expenditure. Additionally, employee satisfaction soared as they were presented with a broader range of tailored benefits, fostering higher morale and improved retention rates. 

Case Study 2: WidgetCrafters’ Transformation with a PEO

WidgetCrafters, a small manufacturing business, struggled to keep up with changing employment laws and compliance issues. The company’s owner felt overwhelmed and wanted to find a way to streamline HR processes.

WidgetCrafters decided to partner with a reputable Professional Employer Organization (PEO) known for its HR expertise. The PEO took over various HR functions, including benefits administration, handle payroll, and compliance. With a PEO handling these critical aspects, WidgetCrafters had the opportunity to redirect their resources and focus on refining manufacturing processes and expanding their business, ultimately strengthening their core operations.


Employee benefits are a significant cost for businesses, and making the right choice in terms of health insurance benefit options and advisory services is vital for the success and sustainability of any organization. The decision whether to go for a direct insurance company, a private brokerage, or a PEO should not be made in haste. The ideal solution depends on the specific circumstances and priorities of each business. For many, a private brokerage offers the flexibility, expertise, and customization necessary to effectively tailor benefits packages and control costs. However, a Professional Employer Organization can provide valuable support for companies seeking a streamlined approach to HR management and compliance.

Ultimately, the best solution for most businesses will hinge on their size, budget, company culture, HR capabilities, and long-term goals. By carefully evaluating these factors and considering this guide, businesses can make an informed decision that aligns with their specific needs and greatly enhances the well-being of their workforce and the success of their organization.

— Updated, October 2023

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