Can You Stay in Your PEO and Still Improve Your Medical Benefits?
Many employers believe they have only two options when working with a Professional Employer Organization (PEO):
- Stay fully bundled within the PEO model
- Leave the PEO entirely
But there’s a third option that often goes overlooked.
In some cases, employers can remain within their PEO for administrative services while carving out medical benefits to access alternative solutions that offer stronger coverage and more competitive pricing.
For growing organizations, this hybrid approach can deliver meaningful improvements without disrupting existing operations.
What Is a Medical Carve-Out?
A medical carve-out refers to separating health insurance coverage from the bundled benefits package typically offered through a PEO.
Instead of using the PEO’s medical plan options, employers work with an independent broker or consultant to explore alternative coverage structures, including Association Health Plans (AHPs).
This approach allows organizations to maintain the simplicity of their PEO relationship while gaining flexibility where it matters most: healthcare costs and employee benefits design.
Understanding Association Health Plans (AHPs)
Association Health Plans allow employers to join together through an industry group, association, or qualified structure to access health coverage similar to large employer plans.
Key advantages may include:
- Large-group pricing structures that can lower premiums
- Enhanced plan design flexibility compared to standardized PEO offerings
- Stronger benefits coverage options aligned with workforce needs
- Broad Blue Cross Blue Shield network access in many markets
Because AHPs aggregate multiple employers, they can sometimes unlock negotiating power and pricing advantages not available to individual small or mid-sized groups.
Why Many Employers Don’t Realize This Option Exists
PEO models are often presented as all-or-nothing solutions. Employers may assume that medical coverage must remain bundled within the PEO agreement.
However, depending on your structure, contracts, and regulatory considerations, carve-outs may be possible.
Without an independent review, organizations may miss opportunities to:
✔ Reduce overall healthcare costs
✔ Improve benefit competitiveness
✔ Expand provider network access
✔ Align plan design more closely with employee needs
Signs a Medical Carve-Out Might Make Sense
A carve-out strategy may be worth exploring if:
- Medical premiums have increased significantly year over year
- Your PEO’s plan options feel limited or inflexible
- Employees want broader provider networks
- Leadership is seeking greater transparency in healthcare spending
- You want to enhance benefits without leaving your PEO structure entirely
Even if you ultimately remain fully bundled, comparing options can provide valuable clarity.
How Maddock & Associates Helps
At Maddock & Associates, we specialize in helping employers understand their options without unnecessary disruption.
Our approach includes:
- Side-by-side comparison of PEO medical benefits and Association Health Plans
- Cost analysis and long-term strategy review
- Plan design evaluation focused on employee experience
- Guidance on compliance and implementation considerations
As an independent firm, our goal is to help employers build benefits strategies that deliver both value and flexibility.
Ready to Compare Your Options?
If you’re curious whether a medical carve-out could improve your benefits while reducing costs, we’re here to help.
Contact Maddock & Associates for a personalized evaluation: dave@maddockinsurance.com
Because your benefits strategy should work for your organization today and support where you’re going next.
