PEO vs Heal: The Real Cost Math at 30, 75, and 150 Employees
“How much would we save by leaving the PEO?” is the question every founder asks at renewal time. It almost always gets the wrong answer.
The wrong answer compares admin fees. The PEO charges roughly $99–$150 per employee per month. A broker charges $0 to the employer — commissions come from the carrier. On the surface, leaving the PEO looks like a clean admin-fee saving.
The actual cost gap is bigger, uglier, and lives in five places the invoice doesn’t show: master plan pooling, hidden margin layers, claims data ownership, customization friction, and HR overhead. This is the gap Heal was built to capture.
Heal is an AI-native benefits broker for startups in the 30–150 employee range. We model your specific situation against a level-funded alternative designed around your actual workforce, manage the transition without coverage gaps, and provide an AI concierge that handles 75% of the benefits questions HR teams typically drown in. The cost case for Heal is different at 30 employees than it is at 150 — and this post walks through both honestly, including when staying in your PEO is the right call.
Let’s go through the math at three scales using 2026 market data.
The four buckets of total benefits cost
Before the scenarios, the categories. Every employer’s true benefits cost lives in four buckets, regardless of whether they’re inside a PEO or running a different stack:
- Admin or PEO fee — what you pay for the platform and support
- Health insurance premium — by far the largest line, driven by carrier negotiations and plan funding type
- Ancillary lines — dental, vision, life, disability, workers’ compensation, EPLI
- Hidden costs — pooling subsidy you can’t see, customization friction, HR time spent on benefits tickets
Most PEO comparisons only look at bucket #1. That’s the smallest bucket. Bucket #2 is roughly 10× bucket #1, and bucket #4 is often invisible until you stop paying it.
For all three scenarios below, we use Mercer’s 2026 projection of $18,500 per employee total health benefit cost, with employer typically covering ~75% (roughly $14,000) and employee paying the rest. Level-funded savings are modeled at the conservative end of the 15–25% range reported across Gusto, UnitedHealthcare, and independent broker analyses.
Scenario A: 30 employees — Heal helps, but the cost case is marginal
At thirty employees you’re at the high end of the PEO sweet spot. You can technically shop the open market, but underwriters won’t take you very seriously and you may not qualify for level-funded plans without strong census data.
| Cost line | Inside PEO | Outside (Heal + level-funded if available) |
|---|---|---|
| Admin / HR overhead | $40K (≈$110 PEPM × 30 × 12) | $45K (HRIS $15K + fractional HR $30K) |
| Health insurance (employer share) | $420K (75% × $18.5K × 30) | $375K (-10% with limited leverage) |
| Ancillary lines | Bundled | $18K ($50/EE/mo × 30 × 12) |
| Compliance + brokerage | Bundled | $0 (Heal is paid by carrier) |
| Total annual employer cost | $460K | $438K |
| Difference | — | ~$22K savings (5%) |
At 30 employees, the savings are real but small. The case for leaving the PEO here is rarely “this is cheaper” — it’s “we want claims data ownership before our next renewal,” or “we need plan customizations the PEO won’t support,” or “we’re scaling fast and don’t want to redo this in 12 months.”
Where Heal fits at this stage. Honestly, if you’re at 30 employees, no plans to grow past 50 in the next year, and your PEO renewal is reasonable, we’ll often tell you to stay another cycle. The cost case is too close. But if you’re planning to be at 70+ by next renewal, switching to Heal now means you accumulate claims data for 12 months before that renewal — which is the single highest-leverage input to your next pricing. We’ve also worked with companies at this size when their PEO plan can’t support a specific benefit they need (fertility, GLP-1, mental health point solution) — at that point the case is strategic, not financial.
Scenario B: 75 employees — squarely Heal’s sweet spot
Seventy-five employees is the company we built Heal for. The cost structure has flipped, you qualify for level-funded plans confidently, you have enough census data for competitive underwriting, and PEO admin fees become a meaningful line item.
| Cost line | Inside PEO | Outside (Heal + level-funded) |
|---|---|---|
| Admin / HR overhead | $99K (≈$110 PEPM × 75 × 12) | $90K (HRIS $30K + benefits specialist $60K) |
| Health insurance (employer share) | $1,050K (75% × $18.5K × 75) | $840K (-20% level-funded) |
| Ancillary lines | Bundled | $45K ($50/EE/mo × 75 × 12) |
| Compliance + brokerage | Bundled | $0 (Heal is paid by carrier) |
| Total annual employer cost | $1,149K | $975K |
| Difference | — | ~$174K savings (15%) |
At 75 employees, $174K is hard to ignore. That’s a full-time engineer, or runway, or budget for benefits you don’t have today (mental health point solution, fertility coverage, GLP-1 support). And the gap widens every year — a 7% PEO renewal on $1.05M is another $73K of cost, while a renewal-neutral year on a level-funded plan with your own claims data is roughly $0–$30K of increase, sometimes a refund.
Where Heal fits at this stage. This is exactly the workload Heal was designed for. At 75 employees you can’t justify a full-time benefits team, but you can’t keep ignoring a $174K annual gap either. Our platform does the work a Fortune 500 benefits team does — designs the level-funded plan around your actual workforce, runs the underwriting analysis against multiple carriers, manages the renewal each year using your claims data, and handles the day-to-day employee support through the AI concierge. The economic result across our deployments at this scale: roughly $4,000 in savings per employee annually, with a 75% drop in HR benefits tickets and 80+ NPS from employees. The operational result: HR gets its time back, and the CFO sees the savings on the next quarterly close.
Scenario C: 150 employees — the math no longer works for PEOs
At one hundred fifty employees, staying in a PEO becomes structurally hard to justify on cost grounds alone.
| Cost line | Inside PEO | Outside (Heal + level-funded with claims data) |
|---|---|---|
| Admin / HR overhead | $198K (≈$110 PEPM × 150 × 12) | $180K (HRIS $50K + HR generalist + ops $130K) |
| Health insurance (employer share) | $2,100K (75% × $18.5K × 150) | $1,575K (-25% with strong census + claims) |
| Ancillary lines | Bundled | $90K ($50/EE/mo × 150 × 12) |
| Compliance + brokerage | Bundled | $0 (Heal is paid by carrier) |
| Total annual employer cost | $2,298K | $1,845K |
| Difference | — | ~$453K savings (20%) |
Four hundred fifty thousand dollars is a senior hire. It’s category-defining benefits ahead of competitors. It’s a year of runway extension on a Series A. And critically, this number compounds — each year of staying on a PEO master plan locks in the next year’s renewal without leverage to negotiate.
Where Heal fits at this stage. 150 employees is still well within Heal’s range, though companies at this size sometimes also evaluate building a dedicated internal benefits function. Our pitch versus that build is: a 1–2 person internal team fully loaded costs ~$300K and still needs broker partnership. Heal delivers that team’s work — plus the AI concierge employees love — without the headcount. We continue to handle the operational and analytical layer through 250–300 employees; past that, the conversation usually shifts to whether you want a bespoke benefits ops partnership.
The cost curve, visualized
If you plot total benefits cost per employee against headcount for both models, the lines cross somewhere between 50 and 75 employees and diverge sharply after that.
| Headcount | PEO total cost (PEPY) | Heal model cost (PEPY) | Annual savings if outside |
|---|---|---|---|
| 30 | $15,300 | $14,600 | $22K |
| 50 | $14,800 | $13,500 | $65K |
| 75 | $15,320 | $13,000 | $174K |
| 100 | $15,300 | $12,600 | $270K |
| 150 | $15,320 | $12,300 | $453K |
The pattern: PEO per-employee cost stays roughly flat across the range, while the Heal model gets cheaper as you scale because the fixed HR overhead amortizes across more employees and your insurance leverage grows.
The hidden costs PEOs don’t show on invoices
The scenarios above are conservative. They underestimate the gap in three ways that Heal specifically addresses:
Master plan pooling subsidy. If your workforce is younger and healthier than the PEO’s overall pool, you’re cross-subsidizing other employers’ claims. The PEO won’t tell you this because they don’t isolate it. Healthy startups often pay 10–15% more than their actual risk warrants. Heal’s level-funded plans are priced against your specific census — you stop subsidizing strangers.
Customization friction tax. Every benefit you want outside the master plan structure — fertility, GLP-1, mental health point solutions, ICHRA for remote workers — either isn’t available or comes through the PEO’s vendor list at marked-up rates. This shows up as recruiting losses and retention costs, not benefits line items, which is why it’s so easy to miss. Heal builds these in as first-class plan components.
HR ticket overhead. Industry benchmarks suggest HR teams spend 30–40% of their time on benefits-related questions in the absence of self-service tools. For a 75-person company with one HR person, that’s $25K–$40K of HR time annually. Heal’s AI concierge — five agents handling plan selection, care navigation, pharmacy savings, coverage questions, and medical bill negotiation — cuts ticket volume by 75% across our deployments.
The “free broker” model, explained
If brokers don’t charge employers, who pays them?
Carriers do. Health insurance brokers are typically paid 3–8% of the annual premium by the carrier whose plan you select. This is built into the premium you pay regardless of whether you have a broker — so going without one doesn’t save you money, it just means the commission is unclaimed.
The honest critique of the broker model is that brokers earn more when premiums are higher, which creates a misalignment if the broker isn’t actively pushing for cost reduction. The traditional broker industry has a long history of “set it and forget it” servicing for exactly this reason.
This is the structural reason we built Heal. When optimization is continuous and automated — rightsizing plans against actual usage, redirecting employees to in-network providers, catching billing errors, negotiating bills — the broker can actually reduce premiums year over year, not just renew them. Our incentive is to keep clients for the long term, which means proving cost reduction every cycle. The numbers from our deployments: ~25% reduction in total healthcare costs, 14% → 8% drop in out-of-network claims, 65% → 40% drop in employees on the highest-premium plan after AI-assisted enrollment.
What to do with these numbers
Three takeaways:
If you’re under 50 employees, the cost case for leaving is weak. Focus on operational fit and strategic control rather than savings. Heal can still help if you have specific customization needs or are scaling fast, but don’t move on cost alone.
If you’re 50–100 employees and your PEO renewal is coming up, model your specific numbers seriously. The 15% gap at 75 employees is real, but it depends heavily on your workforce census. Heal models this for free using your actual data — typically a 48-hour turnaround.
If you’re past 100 employees and still in a PEO, the question isn’t whether to leave — it’s how to leave cleanly. That’s the next post.
Heal models this analysis for free using your actual census, state distribution, and current PEO invoice. We tell you the real number for your specific company, not industry averages. Get a free benchmark →