If you're a small business trying to offer health benefits, two modern models dominate the decision — and they're opposites. A PEO pools you with other employers to get a big-company group plan. An ICHRA hands your employees a budget to buy their own coverage. Here's how to choose.
This is an independent guide from QuoteSweep, which maps the modern commercial insurance landscape. QuoteSweep does not compete with any of these companies.
TL;DR: A PEO like Justworks pools employers under a master policy to deliver large-group coverage, bundled with payroll, HR, and compliance. An ICHRA (run on Thatch, Take Command, and others) gives employees a tax-free budget to buy their own individual plans. PEO = an all-in-one HR-plus-group-plan bundle; ICHRA = employee choice and cost control without co-employment.
The core difference
- PEO: you enter co-employment; the PEO runs payroll, HR, and compliance, and offers a group health plan through a pooled master policy. Employees join that plan.
- ICHRA: you stay the sole employer; you set a defined-contribution budget, and employees buy their own individual coverage on the marketplace, reimbursed tax-free.
One centralizes everything into a group plan; the other decentralizes plan choice to each employee.
How they compare
| PEO (Justworks) | ICHRA (Thatch, Take Command) | |
|---|---|---|
| Health model | Large-group master policy | Employees buy individual plans |
| Who picks the plan | Employer offers the group plan | Each employee |
| Bundled with | Payroll, HR, compliance | Just the benefit (payroll optional) |
| Employment | Co-employment | You stay sole employer |
| Cost control | Group renewal (can swing) | Fixed employer budget |
| Setup | Onboard to the PEO | ~5–10 minute platform setup |
What each is good at
- PEO strengths: one vendor for payroll + HR + compliance + benefits; access to large-group coverage a tiny employer couldn't get alone; simple for the employer. Justworks publishes per-employee pricing (PEO Basic ~$59, PEO Plus ~$109 with health).
- ICHRA strengths: fixed, predictable employer cost (you set the budget); employee choice of plan and network; no co-employment; fast setup. Platforms like Thatch and Take Command handle compliance and enrollment; StretchDollar offers transparent flat pricing for small firms.
Who each one fits
- Choose a PEO if you want to outsource the whole employment back office (payroll, HR, compliance) and give employees a traditional group plan in one bundle.
- Choose an ICHRA if you want predictable costs and employee choice, don't want co-employment, and are comfortable letting employees pick their own individual plans.
Some employers even move from a PEO to an ICHRA to regain cost control while keeping benefits — that's a big driver of ICHRA growth.
Frequently Asked Questions
What is the main difference between a PEO and an ICHRA?
A PEO delivers a pooled large-group health plan bundled with payroll/HR/compliance under co-employment; an ICHRA gives employees a tax-free budget to buy their own individual coverage, with no co-employment.
Is an ICHRA cheaper than a PEO?
Often more predictable: with an ICHRA you set a fixed employer contribution, versus a group renewal that can swing. Actual cost depends on your workforce and contributions; compare both for your group.
Can I switch from a PEO to an ICHRA?
Yes — many employers move to an ICHRA for cost control and employee choice. ICHRA platforms handle the setup and compliance.
Do I still run payroll with an ICHRA?
You can keep your own payroll; ICHRA platforms integrate with payroll but don't require co-employment the way a PEO does. A PEO, by contrast, runs payroll for you.
The bottom line
It's centralize vs. decentralize: a PEO bundles everything and puts employees on a group plan; an ICHRA hands employees a budget and their own choice of plan. Want the all-in-one HR back office and a group plan? A PEO like Justworks. Want cost control and choice without co-employment? An ICHRA — compare the best ICHRA platforms or the full health & benefits hub.
