Estimated reading time: 4 minutes, 33 seconds

As a small business owner, you want to provide your employees with health insurance. However, there are a plethora of important choices to make in a limited timeframe. When it comes to providing your  team with health insurance, as long as you are well informed it will greatly simplify the process of choosing what health plans ultimately make the most sense for you and your company. If you are not entirely sure whether you should use a Professional Employer Organization (PEO) or consider Fully Insured Medical Plans, it might be helpful to know the pros and cons of each:

What are PEOs?

PEOs offer services ranging from payroll processing, benefits administration, HR training and support, and workplace insurance coverage, to both small and medium-sized businesses.

The Pros of PEOs: 

  • PEOs include employees with all of the PEO’s co-employees to create one larger group/pool of employees; This enables the PEO to provide the employees with access to employee benefits similar to ones they would receive as part of a larger corporation, despite the fact they work for a small business. 
  • PEOs offer more services to small business employees than just health benefits. PEOs make available compliance support, payroll,  human resources services, and workers compensation. 
  • PEOs lower the administrative burdens of small businesses which allows them to focus on their core business strategies in lieu of worrying about the minutiae of benefits.

The Cons of PEOs: 

  • PEOs offer a very limited choice in carriers, meaning that your employees won’t necessarily be presented with the best options for them or their families. 
  • PEOs require administrative fees to support their services and are charged per month per employee or percentage of total payroll. 
  • PEOs force small businesses to rely on an external team (rather than internal employees) to handle important and sensitive HR processes.

 What are Fully Insured Plans? 

Fully Insured Plans are employer-sponsored health plans where the premium rates are fixed for at least a year (could have longer contracts) and are based on the number of employees enrolled in the plan each month and their ages. The company pays the insurance carrier a premium.

The Pros of Fully Insured Plans: 

  • With Fully Insured Plans, the prices are based on ages and/or zip code which allows employers to budget. The rates do not vary with the health of employees, and you cannot be denied based on the health of your employees (no medical underwriting required.) The insurance provider manages all claims, and the risk is assumed by the insurance company. 
  • With Fully Insured Plans, you can traditionally choose your own package and decide on carriers, as opposed to being required to stick to a very limited set offered by a PEO. You can purchase a fully-insured plan if you have at least 2 employees. Some PEOs require you to have a higher minimum number of employees (5 Employees).   
  • With Fully Insured Plans, there are no administrative fees paid to a PEO. You can choose your own payroll company and have internal HR resources.

 The Cons of Fully Insured Plans: 

  • With Fully Insured Plans, premium costs can be higher depending on your geography and age of employees, regardless of the overall health of your employees. (Sometimes claims experience varies depending on the size of the company.) 
  • With Fully Insured Plans, you don’t have the “one-stop shop” of payroll, HR, and compliance that is available with most PEOs. 
  • With Fully Insured Plans, the administrative burdens associated with running a small business fall solely on the business.

The health insurance options available for small business employers are vast, and there are pros and cons to each choice available to you and your employees. Prior to making a decision, it is best practice to be as familiar with all of the details as possible. In the case of PEOs vs. Fully Insured Plans, neither is necessarily better than the other. The best approach to acquiring small business health insurance is entirely dependent on the specifics of your company and your individual employees. If you do your research and don’t rush into making a final decision, you’ll secure coverage for your team that suits all parties concerned.


Sally Poblete has been a leader and innovator in the health insurance industry for over 20 years. As a broker and former industry executive herself, she founded Wellthie out of a deep passion for making health insurance more simple and approachable for consumers and small businesses. She had a successful career leading product development at Anthem Blue Cross Blue Shield, one of the nation’s largest health insurance companies.


Sally received her B.S. in Management magna cum laude from New York University and received her MBA from the Wharton School at the University of Pennsylvania, specializing in Health Care Management. Since founding the company, Wellthie has received numerous recognitions as an innovator in the healthcare industry, including “Forbes 10 Healthcare Tech Disruptors to Watch,” “30 Health Tech Startups with the Potential to Change the World,” and “Top 40 Health Care Transformers.” Most recently, Sally was recognized as one of New York Business Journal’s Women of Influence.

Sally has presented at numerous conferences nationwide, including InsureTech Connect, the AHIP Institute & Expo, and the HITLab Innovator’s Summit. She is a frequent media contributor and has been featured in such notable publications as Forbes, Inc., The Huffington Post, and BuzzFeed.

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