Key Takeaways
- In most cases, you cannot keep your current health insurance plan when you join a PEO, because the PEO enrolls your employees in its own pooled plans.
- The tradeoff is that PEO plans are typically 20 to 25 percent cheaper and offer better coverage than what small businesses can buy on their own.
- Some PEOs allow you to keep your existing plan for a transition period, but the long-term model uses the PEO's plans.
- If keeping your current doctor network is critical, check the PEO's plan networks before signing to make sure your providers are included.
The Short Answer
In most cases, no. When you join a PEO, your employees are enrolled in the PEO's health insurance plans. The PEO pools your employees with thousands of others to negotiate large-group rates, and that pooling only works if everyone is on the same plan. You generally cannot keep a standalone small-group plan and still get the PEO's pooled pricing.
There are limited exceptions. Some PEOs offer a transition period where you can keep your existing plan for a few months while you move employees over. And some PEOs that operate as ASOs, or administrative services organizations, allow you to keep your own insurance while they handle payroll and HR. But the standard PEO model uses the PEO's plans.
Why the PEO Plan Is Usually Better
The reason most owners switch is that the PEO plan is better and cheaper. Small businesses typically pay 20 to 25 percent more for health insurance than large companies because they lack negotiating power. A PEO pools your employees with thousands of others, which gives you access to large-group rates, better networks, and richer plan options at a lower cost.
PEO plans also tend to have better provider networks. Many small-group plans have narrow networks that exclude top hospitals or specialists. PEO plans, because they serve large populations, usually have broad networks that include the major health systems in your area. If your current plan has a narrow network, the PEO plan may actually give your employees more choice, not less.
Check the Network Before You Sign
The main concern owners have is whether their employees' doctors will still be in network. This is a valid concern, and the solution is to check the PEO's provider network before signing. Ask the PEO for a provider directory, or give them a list of your employees' key doctors, and confirm they are in network.
In most cases, the major health systems in Florida, like BayCare, Moffitt, Sarasota Memorial, and the large hospital networks in Tampa, Orlando, and Miami, are in the PEO networks. But it is always worth verifying, especially if you have employees who see specialists at specific facilities.
Prescription Drug Coverage
The other common concern is prescription coverage. Each plan has its own formulary, which is the list of covered medications and their tier levels. A drug that was a $10 copay on your old plan might be a $40 copay on the new plan, or vice versa. If you have employees on expensive specialty medications, it is worth checking the formulary before signing.
That said, PEO plans often have better formularies than small-group plans because they have more negotiating power with pharmaceutical companies. The PEO can also offer multiple plan tiers, so employees who need richer drug coverage can choose a plan that covers their medications at a lower copay.
When Keeping Your Current Plan Makes Sense
There are a few situations where keeping your current plan is the right move. If you have a highly specialized plan, like a self-funded arrangement or a union plan, that the PEO cannot replicate, you may want to keep it. If your current plan has a unique provider relationship that is critical to your workforce, like a specific hospital system for a healthcare practice, check whether the PEO plan includes it before deciding.
In these cases, an ASO model may be a better fit than a PEO. An ASO handles payroll, HR, and compliance but lets you keep your own health insurance. The tradeoff is that you do not get the pooled insurance savings, so the overall cost is usually higher. We help you compare both options so you can choose the model that fits your situation.
Frequently Asked Questions
Will my employees' doctors still be in network with the PEO plan?
In most cases, yes. PEO plans typically have broad networks that include major health systems. But you should always check the PEO's provider directory against your employees' key doctors before signing.
Can I keep my current health insurance and still use a PEO for payroll and HR?
Not with a standard PEO. You would need an ASO, or administrative services organization, which handles payroll and HR but lets you keep your own insurance. The tradeoff is that you do not get the pooled insurance savings.
Is the PEO health insurance plan cheaper than what I have now?
For most small businesses, yes. The average savings is 20 to 25 percent on health insurance premiums through PEO pooling. A free cost comparison will show the exact difference for your plan.