There’s a good reason to pay attention to projections for 2027 employer healthcare costs. They’re expected to rise sharply again next year, with some projections approaching double digits.
For smaller employers, proposed increases are even higher.
That’s a meaningful budget issue.
Be Sure to Ask the Right Questions
And when a PEO offers what appears to be a less expensive alternative, it’s understandable that you would want to learn more.
But with everything you’re considering across your people-related decisions, be careful not to compare only the healthcare premium and stop there.
An HR relationship with a PEO affects much more of your people infrastructure. Depending on the arrangement, payroll, benefits administration, workers’ compensation, HR support, and other employment functions can be bundled together.
Instead of asking, “Can you save us money on health insurance?”
The better question is, “What are we buying in total, what will it cost in total, and what are we giving up or changing to get it?”
Before You Compare, Be Sure To Compare the Same Things.
Take time to consider:
- Health plan premiums and employer contributions
- Administrative and per-employee fees
- Payroll costs
- Workers’ compensation costs
- HR services included and their actual level of support
- Benefits administration
- Technology fees
- The HR responsibilities currently falling to your leadership team or an assistant, and which of those would go away
- Contract terms and potential costs or complications if you decide to leave the PEO
You want to understand the total financial and operational impact, not just the most visible savings. If you don't have a dedicated HR professional, some of your current HR costs may be harder to see. Consider the time your leadership team or administrative staff spends handling employee questions, payroll issues, benefits administration, compliance, and other people-related needs. Then look at what the PEO would take off their plates, what would still need to be handled internally, and what additional fees or services are involved. A lower healthcare premium may be compelling, but it doesn't tell you the full value of the arrangement.
What Kind of HR Relationship Does Your Business Need?
Health insurance is one part of HR.
If you’re facing a painful healthcare premium renewal, you want to be careful about making a decision that impacts your broader people operations system to solve one benefits problem.
Consider what you need beyond health insurance.
How much HR expertise and management support does your organization require for you to be freed up for leadership-level decisions and tasks? What services would be included in a PEO relationship? Where would your managers and employees go for help? How much flexibility would you retain as your organization changes?
A PEO can be the right solution for some organizations. Others may benefit from maintaining more flexibility in how they structure their HR, payroll, and benefits support.
You may also find that a PEO handles some needs well but leaves gaps that require additional HR expertise.
The important thing is to understand the entire relationship you're entering, not just the benefits offering that first got your attention.
Look At The Whole Picture Before You Decide
A significant health insurance increase deserves a serious review. But it doesn't have to be the sole consideration in a much larger HR decision.
A lower company cost can become much less attractive if it substantially weakens a benefit employees value. Changes in networks, deductibles, copays, prescription coverage, employer contributions, or family coverage can also affect recruiting and retention.
Before making a change, understand the total cost, what's included, what isn't, how employees will be affected, and how the arrangement fits the way you want to manage your organization.
If you're not sure how to evaluate the options, an experienced HR perspective can help you ask the right questions before you commit.
The goal isn't simply to find a lower premium. It's to make the right decision for your organization and your people.
Have questions about your 2027 benefits strategy? Let's have a conversation.
Aug 27, 2026
