Insurance Broker vs. PEO 101

Talking to your groups about the differences between working with you versus a PEO.


An increasing number of American businesses are exploring Professional Employer Organizations (PEOs). Your groups are likely receiving phone calls and emails about how affordable and hassle-free PEOs are compared to other options, like your agency. The truth is, PEOs do help businesses solve some of their most time-consuming problems. But, as a user of Ease, you’re equipped to address those same problems.

In this 101 Lesson, we dive deep into why working with you and your agency is just as effective as working with a PEO. This information, which we’ve summarized in this flyer for employers, can be used to frame conversations with groups and prospects.

What is a PEO?

A PEO is a firm that provides a service under which an employer can outsource employee management tasks such as employee benefits, payroll and workers compensation, recruiting, risk/safety management, training, and development. PEOs are able to do this by hiring a client company’s employees, thus becoming the employer of record for tax and insurance purposes. This is also known as co-employment.

An increasing number of employers are exploring PEOs since the passage of the Affordable Care Act (ACA). The ACA requires any employer with more than 50 employees to offer insurance, and PEOs have taken advantage. Their status of co-employment enables them to offer better rates since health insurance premiums are determined based on number of employees and the number of those employees who use the health insurance.  

What are the key differences between you and a PEO?

If your groups ask you about PEOs, we recommend clearly explaining the differences between how you and a PEO handle common benefits situations.

Below are our recommended talking points.

Talking Point 1: Technology

Technology is utilized in different ways.

Brokers PEOs
  • You can offer your groups one integrated system of record for benefits and HR. Their employees can enroll in benefits entirely online.
  • Your benefits administration software enables groups to work with the best in breed for each aspect of HR: payroll, consumer-driven benefits, voluntary benefits, and more.
  • You do not solely manage payroll for a group. You offer payroll connections that allow groups to sync their benefits and payroll, making it easier to add new employees, manage changes, and keep employee records up to date.
  • Employees receive access to a system and can enroll in benefits completely online, but the PEO administers the entire solution.
  • PEOs may work with a business’ HR team to gather the correct information, but for the most part, they control the entire process.
  • Depending on the PEO, there may or may not be an option to add voluntary or consumer-driven benefits.
  • PEOs manage their services entirely through one system. If an employer has issues with the payroll feature, they’ll have to switch their entire solution to work with a new provider.

Talking Point 2: Optionality & Expertise  

The way in which PEOs are constructed may allow for lower premiums and deductibles, but there is less expertise and flexibility.

Brokers PEOs
  • You are able to listen to feedback about which carriers’ plans best worked for your employees in the past. This feedback allows you to explore new carriers or plan types your groups want to offer.
  • You are able to customize a benefits offering based on the traits of a groups’ staff, average age, company size, and location.
  • You assist employees in-person during open enrollment. Because you are required by law to be licensed to sell insurance in your area, you have a deep understanding of the local healthcare market.
  • You are an advocate for your employees with carriers. Your history and experience with carriers makes you the perfect candidate for this.
  • You provide a value-added sales process. As an expert on plan design and claims management, you are well-positioned to teach a client about how they can reduce cost, or help an employee pick the best plan for their family.
  • Co-employment may enable competitive rates, but it also means that plans are based on all of the groups they employ, not just one. Therefore, the lower premiums and deductibles aren’t necessarily aligned with a particular business’s needs.
  • PEOs charge an unemployment tax based on all of their employers. Therefore, a small local business may be charged the same as a big corporation.
  • There are PEOs who work together with brokers. In this case, the broker controls the benefits offering, and the PEO manages other aspects like payroll and paperwork.
  • There can be a lack of personalized service. Although many PEOs offer customer support, it’s not in-person.  Employees have to rely on chat services and phone calls if they have questions.

Talking Point 3: Managing Changes

It’s not easy to switch from one solution to another. It’s important for a business to think about their company not just today, but 5 to 10 years in the future. There are factors to consider from both perspectives.

Brokers PEOs
  • If a group switches from working with a PEO to working with you, they’ll have to find a new payroll provider. Even with available carrier connections, this process can take time and delay paychecks for employees.
  • If your offering seems pricey to your groups right now, remind them that premiums and deductibles usually decrease depending on the number of employees they have.
  • If a group decides to switch to a PEO from your services or vice versa, they will have to suspend coverage and initiate new coverage. It’s a similar process to switching jobs, since a PEO employs those they offer insurance to.
  • Companies planning to grow should know that the cost of a PEO will rise the more employees they add. PEOs charge 3-15% of payroll per employee, and you do not.

Talking Point 4: The Role Of HR 

Neither you, nor a PEO, truly eliminates the need for HR staff.

Brokers PEOs
  • You work with HR teams to pick benefits, provide employee enrollment assistance, and manage changes.
  • You are able to provide HR teams with supporting documentation regarding the plans you offer or the benefits administration software you use.
  • You can offer your groups additional HR support with services like HRAnswerLink.
  • You are able to recommend providers for different consumer-driven benefits like HSAs and telemedicine, which integrate with benefits administration software like Ease.
  • PEOs take over the day-to-day administration of benefits and payroll.
  • PEOs do not eliminate the “human” aspect of human resources. PEOs do not offer HR staff in the office. This limits employee access to experts regarding career support, internal conflicts, and benefits education are resources employees are looking for.
  • It’s harder to manage terminations with a PEO because a group’s’ employee technically is employed by the PEO, not the group.

We hope this lesson gives helps you the next time your groups ask about the differences between a broker and a PEO.

Don’t forget about this flyer we made for your prospects on the differences between your offering and a PEO’s offering.