The short answer
A broker helps you buy and run your own group health plan, and is usually paid by the carrier. A PEO becomes a co-employer of your staff and puts them on its own large plan, alongside payroll and HR, for a fee per employee. Brokers keep you in control of the plan; PEOs trade some control for bundled services and pooled buying.
Small employers looking for health cover usually meet two kinds of helper: a benefits broker and a professional employer organization, or PEO. They solve the same problem in very different ways, and the right one depends on how much of the HR load you want to hand over.
How a broker works
A licensed broker helps you buy a group health plan in your company’s name. They get quotes from the carriers they are appointed with, explain the options and run enrollment, then service the plan through the year and at each renewal.
- You are the plan sponsor. You choose the plan, set eligibility and contributions, and can change broker without changing the plan.
- Payment. For small groups, usually a commission from the carrier, built into the premium. Some brokers charge a fee instead. Under federal rules, a broker expecting $1,000 or more for services to a group health plan must disclose it in writing (DOL guidance).
- Scope. Health and other benefits. Payroll and HR stay with you or your payroll provider.
How a PEO works
A PEO enters a co-employment arrangement with your business. It becomes the employer of record for tax and benefits purposes, runs payroll, and puts your employees on its own benefits plans, which cover staff from many client companies.
- The PEO is the plan sponsor. Your employees choose from the PEO’s plans. You decide how much to contribute, within its rules.
- Payment. A fee, typically a percentage of payroll or a flat amount per employee per month, plus the benefit premiums. Fee structures differ widely, so ask for every component in writing.
- Scope. Payroll, tax filing, workers’ compensation, HR support and compliance, as well as health benefits.
Side by side
| Broker | PEO | |
|---|---|---|
| Whose plan is it | Yours | The PEO’s |
| Employer of record | You | Shared (co-employment) |
| Typical payment | Carrier commission or a fee | Fee per employee or a share of payroll, plus premiums |
| Payroll and HR | Not included | Included |
| Plan choice | Any carrier the broker can access | The PEO’s plan menu |
| Leaving | Change broker; plan stays | Plan ends; you need new cover |
When a broker is usually the better fit
- You already have a payroll provider and HR handled.
- You want to choose carriers and plan designs yourself.
- You want the option of level-funded or self-funded plans in your own name.
- You are past about 50 employees, where your own group often has buying power of its own.
- You want to be able to change advisers without changing everybody’s insurance.
When a PEO can make sense
- You are very small and want payroll, HR and benefits from one place.
- Your team is young and spread across several states, where a single multi-state plan is attractive.
- You have no one in-house to handle HR compliance.
- You find small group options in your area limited.
Be aware that leaving a PEO means your employees’ health cover ends with it, so you will need a new plan lined up, and the timing should fit everyone’s deductibles and plan year.
What the cost comparison needs to include
Comparing a PEO with a broker-placed plan on premium alone can mislead. A fair comparison includes:
- Premiums for comparable plans (same deductible, out-of-pocket maximum and network).
- The PEO’s administrative fee, stated per employee per month or as a share of payroll.
- What you pay now for payroll, HR software and workers’ compensation, which the PEO may replace.
- Your time. Who will handle enrollment, new hires and leavers either way.
For context, the KFF 2026 Employer Health Benefits Survey puts the average single premium at $9,804 a year and the average family premium at $28,303. Those are national averages, not a quote for any business.
Using both
Some employers use a broker to review a PEO’s offer, or to price a move out of a PEO back into their own group plan. A broker is often the person who can tell you whether your company is now large enough to do better on its own.
A practical way to decide
Write down which jobs you want off your desk. If it is only “find and run a good health plan”, start with a broker; our small business health insurance broker page explains what to ask one. If it is “payroll, HR, compliance and benefits”, get a PEO proposal and ask a broker to compare it with a stand-alone group plan, perhaps a level-funded one.
This guide is general information, not insurance, tax or legal advice. The form below will put you in touch with a licensed broker who can look at your figures.