Healthcare benefits have always been a crucial part of the employee experience, but with medical premiums rising by over 6.5% in 2024 and more than half of large employers planning cost shifts to employees (Mercer, 2025), small and midsize businesses are feeling the pressure. Compound that with a workforce that is becoming increasingly unhealthy and harder to insure, employers are facing difficult choices. Professional Employer Organization (PEO) are a partnership that can provide you with solutions for healthcare benefits.

How are some companies still managing to offer high-quality benefits without wrecking their bottom line?

PEOs are a strategic partner that can help small- to mid-sized businesses not just survive but thrive in a volatile benefits landscape. Here are just a few of the ways they’re making this happen.

Group Buying Power

One of the biggest advantages PEOs offer is access to large group benefits pricing using group buying power. By combining employees from multiple companies under one umbrella, PEOs can negotiate lower premiums, better tiered networks, and cost-efficient plan options. According to NAPEO, businesses in a PEO arrangement see average annual healthcare premium savings of 15%. This isn’t just good for the business — it’s good for retention, too. Employees get better benefits without increased out-of-pocket costs.

Strategic Plan Approach

Rather than pass along rate hikes to employees (which 57% of employers are expected to do in 2026), PEOs take a proactive approach by strategically designing benefit plans that keep costs in check.

Compliance Support

Healthcare benefits come with a mountain of paperwork, regulations, and ever-changing rules. PEOs provide technology and support that simplifies enrollment, onboarding, ACA, ERISA, COBRA compliance, etc. This not only reduces headaches but also protects businesses from fines — a growing concern as audits become more frequent.

Bottom Line

With rising premiums, increasing employee health risks, and tighter budgets, the benefits landscape has never been more difficult to navigate. PEOs offer a strategic, cost-effective solution that gives small businesses access to Fortune 500-level benefits. If you’re a business with 2–100 employees and you’re feeling squeezed by healthcare costs, it might be time to rethink your approach — let’s see what PEO|connect can do for you!