How PEOs Cushion the Blow of Rising Healthcare Costs

Employer healthcare costs are climbing again. Industry forecasts predict average increases of 7–8% heading into 2026, driven by inflation in medical services, specialty drug costs, expanded mental health coverage, and higher utilization across the board.

For small and midsized businesses, that kind of increase can feel impossible to absorb. You want to offer competitive benefits to attract and retain talent, but you also need to protect your bottom line. Even when you do everything right—shop around, negotiate, and optimize your plans—renewal season can still sting.

That's where a Professional Employer Organization (PEO) changes the math.

Why Healthcare Costs Keep Rising

Before we talk solutions, let's acknowledge the problem. Healthcare costs aren't rising because businesses are doing something wrong. They're rising because the entire system is under pressure. Here's what's driving the increases:

• Medical inflation: Hospitals, specialty care, and pharmaceuticals are getting more expensive every year.
• Specialty drugs: Medications for chronic and complex conditions now make up a larger share of total claims.
• Mental health expansion: More employees are seeking mental health services, which is a positive shift—but it also increases plan utilization.
• Post-pandemic utilization: Deferred care during COVID is now catching up, leading to higher claims frequency.

None of this is within your control, but how you structure your benefits is.

How PEOs Help You Save on Benefits

Here's the advantage of working with a PEO: you're no longer negotiating as a small company. You're part of a much larger group with significantly better buying power.

Pooled Risk = Lower Premiums

When you join a PEO, your employees enter a larger benefits pool. Insurers view this group as lower risk because the claims are spread across a bigger population. That translates into:

• Lower per-employee premiums
• More predictable rate increases year over year
• Access to large-group plan designs that aren't available to small businesses on their own

Think of it this way: a 30-person company might see wild swings in renewal costs if just a few employees have high-cost claims. But in a pool of 10,000 employees, those individual claims barely move the needle. The risk is distributed, and the rates stay steadier.

Access to Better Plans

PEOs like Questco also have relationships with national carriers and regional providers. That means you're not limited to whatever your local broker can find. You get access to:

• Competitive plan options across multiple carriers
• Specialty coverages like telemedicine, wellness programs, and mental health support
• Flexible plan designs that can be tailored to your workforce

You still control the decision. But now you're choosing from a much stronger set of options.

How PEOs Help With Benefits Administration and Compliance

Cost containment isn't just about premiums. Hidden losses can accumulate quickly if you're not careful with the back-end work.

Compliance Protection

Health benefits come with a maze of regulations: ACA requirements, COBRA administration, ERISA filings, and state-specific mandates. Miss a deadline or file something incorrectly, and you're looking at penalties that can run into the thousands.

A PEO takes that off your plate. Questco's team monitors regulatory changes, handles required filings, and ensures your plans stay compliant. You get proactive support instead of reactive damage control.

Streamlined Enrollment and Administration

How much time does your team spend answering benefits questions during open enrollment? Or troubleshooting an employee's claim issue? Or updating payroll deductions when someone changes their coverage? With a PEO, you get:

• Guided enrollment tools that walk employees through their options
• Year-round support from benefits specialists
• A single integrated platform for payroll, benefits, and HR data

That's time your team can spend on higher-value work—and it's fewer headaches for everyone involved.

Planning Ahead for 2026 (and Beyond)

Healthcare costs are unlikely to decline anytime soon. Medical inflation, specialty drugs, and rising utilization aren't temporary trends—they're structural realities.

But that doesn't mean you're powerless. The sooner you assess your benefits model, the more control you keep over your costs and your ability to compete for talent.

Here's what smart planning looks like:

• Evaluate your current renewal trajectory: Are your increases manageable, or are they starting to squeeze your budget?
• Consider long-term stability: A PEO offers more than just savings this year—it offers predictability for the years ahead.
• Think strategically about talent: Benefits are one of the top factors in hiring and retention. Can you afford to fall behind your competitors?

Working with a PEO like Questco gives you the leverage of a large employer, the flexibility to tailor your plans, and the expert support to navigate every renewal with confidence.

Take Control of Your Benefits Strategy

Rising healthcare costs are a reality. But how you respond to them is up to you.

Questco helps small and mid-sized businesses turn benefits from a cost burden into a competitive advantage. We offer pooled buying power, compliance protection, expert plan management, and year-round support—all designed to help you do more with less.

Ready to see what's possible? Schedule a consultation to explore ways to stabilize your renewal in 2026.

Frequently Asked Questions

What is a PEO, and how does it help with healthcare costs?
A PEO (Professional Employer Organization) pools employees from multiple businesses into a larger group for benefits purposes. This gives smaller companies access to large-group rates, better plan options, and more stable renewals—along with compliance support and administrative help.

Will I lose control over my benefits if I work with a PEO?
No. You still choose the plans that work best for your team. The PEO gives you access to better options and handles the administration, but the decisions remain yours.

How much can a PEO save on healthcare costs?
Savings vary based on your current plan, claims history, and workforce size. Many businesses see reductions of 10–20% on premiums, plus additional savings from avoiding compliance penalties and administrative inefficiencies.

Is a PEO only for benefits, or do they handle other HR functions too?
Most PEOs, including Questco, offer a full suite of HR services: payroll, compliance, workers' compensation, risk management, and HR technology. You can use as much or as little as you need.

What happens during open enrollment with a PEO?
Questco provides guided enrollment tools, clear plan comparisons, and year-round benefits support. Your employees get expert help making the right choices, and you get a streamlined process with less administrative burden.

How do I know if a PEO is right for my business?
If you're facing rising healthcare costs, struggling with compliance, or spending too much time on HR administration, a PEO is worth evaluating. Contact Questco to see how the model fits your specific situation.

Does working with a PEO affect my ability to claim tax credits?
No. As a Certified Professional Employer Organization (CPEO), Questco ensures clients remain eligible for federal tax credits while gaining the benefits of pooled rates and expert HR support.