Your business is launched, the product is being worked on, and you have 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 likely want to offer your employees access to health insurance.
When it comes down to it, there are a few options for getting your employees access to health insurance.
- Buy it directly: You can do the research yourself, and try to find the insurance provider that will give you 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 it. By using a broker for 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. .
Buying direct is often the least viable option for small businesses. 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.
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?
PEOs offer a scalable and affordable solution for providing access to health coverage, and more. Download the guide to discover how PEOs work for small businesses.
Health Benefits Broker or PEO?
Whether you use a PEO or a broker for employee benefits, you are 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.
The decision isn't always cut and dry.
What does a health insurance broker do?
A health insurance broker is an independent agent 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 should enroll in.
Related Article: How Much Health Insurance Should a Small Business Offer Employees?
According to Risk Heads, “brokers are professionally trained to choose the right policy for their customers, and not to underinsure, therefore avoiding unnecessary claims while maintaining the correct premium income.”
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 several insurance providers to get you access to the plans that match your needs, but some may only be able to sell plans from specific providers.
Related Article: 3 Questions To Ask Before Picking Your Company's Health Insurance
Beyond securing health insurance, brokers generally don’t provide many additional services to their clients.
Advantages of a PEO
On the other hand, 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 suit your business and employees.
In addition to providing access to health coverage, PEOs offer additional services to customers. With a PEO, you can also access high-quality human resources services, compliance support, and payroll — all of which can help make your business run more smoothly.
Here are a few examples of what a PEO can do that a broker generally cannot.
Get the full guide on how PEOs work for small businesses.
Under the Affordable Care Act (ACA), small employers that average fewer than 50 full-time employees are 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.
By working with a PEO, 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 the employees access to health coverage and rates on par with that of a large corporation, even though they work for a much smaller operation.
Related Article: What is Co-Employment? A Quick Guide for Companies
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 giving 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 a PEO is employers can process payroll in the same system where you manage other related tasks, such as employee benefits. This all-in-one solution helps to streamline your business and save you time.
When you’re dealing with complex topics like payroll and employee benefits, 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.
PEOs know about compliance, and can offer support to their customers on both the federal and state levels. An additional advantage of a PEO is that they take on some of the compliance risk for you.
How Justworks Can Help
Justworks is a PEO. We offer a number of services geared to help streamline your business, from access to benefits, payroll, and compliance support. This all-in-one solution can be a great fit for small businesses looking for services and support that go beyond access to health coverage.
If you’re simply in the market for health insurance and want to shop around, a health benefits broker could be a good option.
However, if you want your employees to have access to health coverage at the same affordable rates that large corporations enjoy, and you want other services on top of access to health coverage, PEOs can be the way to go.
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.