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PEO vs Brokers for Employee Health Benefits

Health benefits brokers and PEOs are both experts in their respective industries. How can you find the best fit for your business?

The letter "J" for Justworks.
Jun 30, 20227 minutes

Your business is launched, the product is being worked on, and you’ve hired a few employees — congratulations! As an employer, it’s important to take care of your team and retain the best talent. To do this, you’ll likely want to offer your employees access to health insurance.

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When it comes down to it, there are a few options for getting your employees access to health insurance. You can:

  • Buy it directly. You can do the research yourself, and try to find an insurance provider that has the plans you want at prices you can afford.

  • Buy it through a broker. You can outsource the task to a health insurance broker who specializes in the process. By using a broker to offer employee benefits, you have a professional in your corner who can work with insurance companies on your behalf.

  • Access coverage through a PEO. A Professional Employer Organization, or PEO, offers co-employees access to health coverage at the same affordable rates that large corporations enjoy, even though they may work for a small company. PEOs often offer a more well-rounded benefits package, too. Justworks, for instance, offers access to fitness and mental health perks, 401(k) options, and a rich variety of health insurance plan options. Many PEOs also provide solutions for payroll, HR tools and resources, and compliance support.

Small businesses weighing the costs and benefits of these options often find that buying direct is often the least viable option. Your time is valuable, and navigating health insurance options can get complicated. There is a steep learning curve if you aren’t well-versed in the health insurance marketplace.

There is a steep learning curve if you aren’t well-versed in the health insurance marketplace.

That leaves the other two options. But how do the two options stack up? And how do you know if you should work with a health insurance broker or a PEO? Luckily, you don’t always have to choose between the two. Justworks, for example, works with licensed health insurance brokers so it’s easier for small business owners to gain access to quality benefits along with all of the PEO offerings. A PEO can offer a scalable and affordable solution for providing access to health coverage, along with helping your business in a number of other ways. Download the guide to discover how PEOs work for small businesses.

Health Insurance Broker, PEO, or Both?

Whether you use a PEO or an insurance broker for employee benefits, you’re turning to experts in their respective industries. Generally speaking, a health insurance broker is an expert at insurance, whereas a PEO can provide expertise and assistance in a number of HR and compliance issues, in addition to providing access to health coverage.

What Does a Health Insurance Broker Do?

A health insurance broker, sometimes referred to as a health benefits broker, is an independent agent that’s licensed and regulated by states. They’re able to shop around on your behalf to try and find the right plans to fit your business, and they can make recommendations about which plans you and your employees should enroll in.

Related Article: How Much Health Insurance Should a Small Business Offer Employees?

Health benefits brokers work on commission, meaning they get payments from the insurer for the people they enroll on that insurer’s plans. This can act as an incentive for the broker to successfully match you with what you’re looking for. Brokers may work with multiple insurance providers to get you access to the plans that best match your needs, but some may only be able to sell plans from certain providers.

What’s the difference between a health insurance broker and a health insurance agent?

Generally speaking, agents might represent one particular carrier and provide plans that are limited to what that insurance carrier offers. While this isn’t always the case, brokers are typically seen as offering a slightly wider selection of coverage options. But your company might need more than what a broker can offer.

Beyond securing health insurance, brokers generally don’t provide many additional services to their clients. This is where small businesses should ask more of their benefits package. While health insurance is a must-have, a Justworks study showed that 26% of surveyed employees valued additional perks beyond health benefits most, and 37% of those surveyed valued 401(k) most.

Advantages of a PEO

A PEO typically provides access to health coverage through the specific insurance providers for its plans. Because a PEO acts as a co-employer, the employees of all the PEO’s customers have access to the same pool of plans. As an employer, you’ll want to select a PEO that offers plans and providers that best suit your business and employees.

A PEO typically provides access to health coverage through the specific insurance providers for its plans.

In addition to providing access to health coverage, PEOs offer additional services to customers. With a PEO, you can also access high-quality HR services, compliance support, and payroll software — all of which can help make running and growing your business easier.

Here are a few examples of what a PEO can offer that brokers generally cannot.

Health Coverage

Under the Affordable Care Act (ACA), small employers that average fewer than 50 full-time employees are not penalized for failing to offer access to health coverage. For those who want to provide this benefit, the prices can be much steeper than they are for larger companies.

Because insurance companies look at each company as its own ecosystem, when there are fewer employees, insurers generally charge more in premiums to offset the potential risk. While a health insurance broker can negotiate amongst multiple insurance providers, a broker generally cannot provide access to health coverage at the same affordable rates that large corporations enjoy.

Related Article: 3 Questions To Ask Before Picking Your Company's Health Insurance

When working with a PEO, all your employees are grouped together with the rest of the PEO’s co-employees to form one large group. This means that the PEO can offer employees access to health coverage and rates on par with that of a large corporation, even though they all work for much smaller operations.


Payroll can become very complicated very quickly. This is especially true when businesses have to deal with contractors, bonuses, time-and-a-half pay, and other complexities. Of course, payroll encompasses more than simply paying employees their money. It can also include withholding taxes, putting money into a retirement account, submitting W-2s, and allocating money to various employee benefit plans.

You could do all this yourself, or you could get professional help. One of the advantages of working with a PEO is that employers can process payroll in the same system where they manage other related tasks like employee benefits. An all-in-one solution like this helps to streamline your business and save you time.

Employment Laws

When you’re dealing with complex topics like payroll taxes and employment regulations, you want to make sure you’re doing everything right and in accordance with the law. If not, you could end up with costly fines on your hands.

When working with a PEO, all your employees are grouped together with the rest of the PEO’s co-employees to form one large group.

PEOs know about employment compliance — whether it’s hiring new employees in multiple states, onboarding hybrid teams, or filing payroll taxes — and can offer support to their customers on both the federal and state levels.

An additional advantage of a PEO is that they can also take on some of the compliance risk for you.

Working with a PEO and a Broker

In certain cases, some PEOs provide access to many of their benefits and features, while letting clients bring on their own health insurance.

If you have health insurance coverage that’s already working for you, team up with a PEO that allows you to continue to keep that coverage while giving you access to their HR tools and resources, like payroll software and HR management tools.

This will help strengthen your business operations without you needing to worry about transitioning away from your benefits brokers or wherever you get your company’s health insurance.

How Justworks Can Help

Justworks is a PEO, offering a number of services designed to help streamline your business, from compliance support and payroll, to HR tools and access to benefits. And even if you prefer to get benefits through a broker, our all-in-one solution can still be a great fit for small businesses looking for services and support that go beyond access to health coverage.

With Justworks, you can maintain your relationship with your current health insurance broker while accessing additional perks and services like commuter benefits, fitness memberships, and retirement plan options. By joining a PEO and getting benefits through your health insurance broker, you can have the best of both worlds. And who wouldn’t want that for their employees?

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.