How PEO Clients Are Keeping Health Premium Increases Under 5% in 2025

The year 2025 has delivered another round of challenging news for US employers managing employee health benefits. Industry forecasts from major carriers and analysts like Kaiser Family Foundation and Mercer projected average premium increases of 8-15% for small-group plans, driven by persistent medical inflation, higher utilization rates post-pandemic, rising prescription drug costs, and new regulatory requirements. Yet many businesses partnered with Professional Employer Organizations are experiencing dramatically lower renewals—often below 5%, with some achieving flat rates or even slight reductions.

ExtendIQ Global has been at the forefront of this trend, helping companies across all 50 states maintain predictable, affordable healthcare coverage through our comprehensive PEO Services. By combining national-scale employee pooling with expert plan design and proactive wellness strategies, we consistently deliver outcomes that standalone small and mid-sized employers simply cannot achieve on their own.

The fundamental challenge for independent small-group employers lies in their limited scale. When a company has fewer than 100 or 200 covered lives, carriers treat them as high-risk pools prone to volatility. A single large claim can trigger substantial rate hikes the following year, and these employers lack meaningful negotiating leverage with insurance companies. Administrative overhead adds another layer of expense, as they must manage enrollment, compliance reporting, COBRA administration, and ACA requirements internally or through costly third-party vendors. Without coordinated wellness initiatives, claims trends often worsen over time, creating a vicious cycle of escalating costs.

The PEO model fundamentally changes this dynamic through aggregation and expertise. ExtendIQ Global co-employs thousands of workers nationwide, creating massive risk pools comparable to those of Fortune 500 companies. This scale allows us to secure large-group underwriting from day one, meaning clients benefit from rates typically reserved for organizations with 10,000+ employees. The diversified claims experience across industries and geographies smooths out volatility—when one sector experiences higher utilization, others often balance it out. Carriers respond by offering more stable, predictable pricing year after year.

Beyond raw pricing power, strategic plan design plays a crucial role in keeping increases minimal. We work closely with clients to optimize deductibles, copays, and network configurations while maintaining attractive coverage that supports recruitment and retention. High-deductible health plans paired with generous Health Savings Account contributions have proven particularly effective, giving employees tax-advantaged savings while controlling premium growth. Telemedicine, virtual mental health services, and preventive care incentives are now standard features that reduce downstream claims costs.

Wellness programs represent another powerful lever. Unlike generic initiatives that see low participation, our integrated platforms offer personalized coaching, biometric screenings, gym reimbursements, and incentive-driven challenges that consistently achieve engagement rates above 60%. Higher participation directly correlates with lower claims—clients with strong wellness adoption routinely see 10-20% reductions in medical trend rates compared to industry averages.

Ancillary benefits also contribute significantly to overall savings. Dental, vision, life, and disability coverage obtained through our master policies typically cost 20-40% less than standalone purchases, while voluntary products enjoy higher employee uptake due to payroll deduction convenience and competitive pricing.

Real client outcomes in 2025 tell the story most convincingly. A logistics company with 180 employees faced a proposed 14% increase from their traditional small-group carrier heading into renewal season. After transitioning to ExtendIQ Global’s PEO platform in late 2024, their actual 2025 renewal came in at just 2.9%—representing annual savings exceeding $180,000. Equally important, they enhanced their plan by adding fertility benefits and expanded mental health coverage at no additional premium cost, improvements that strengthened their ability to attract drivers in a tight labor market.

Similar results appear across industries. Technology startups adding headcount rapidly benefit from immediate access to rich benefits without waiting to grow into large-group eligibility. Manufacturing firms with higher-risk profiles see particular value in our workers’ compensation expertise bundled alongside health coverage. Professional services organizations appreciate the administrative relief that allows HR teams to focus on strategic initiatives rather than open enrollment logistics.

The broader economic context makes these savings even more impactful. With labor markets remaining competitive despite some cooling, offering robust healthcare remains essential for talent attraction and retention. Companies overpaying for equivalent or inferior coverage place themselves at a disadvantage against competitors leveraging PEO advantages.

Looking ahead through the remainder of 2025 and into 2026, the cost-control benefits of the PEO model appear poised to grow even stronger. Carriers continue shifting toward value-based arrangements that reward large, well-managed pools. Emerging technologies like AI-driven claims prediction and personalized health coaching—areas where ExtendIQ Global is actively investing—promise further improvements in outcomes and costs.

For any growing business currently managing benefits independently, the mathematics have become compelling. The combination of lower premiums, reduced administrative burden, enhanced compliance support, and superior employee satisfaction creates compounding advantages over time.

Ready to experience these benefits for your organization? Visit ExtendIQGlobal.com to request a complimentary benefits analysis and 2025 renewal projection tailored to your current plan and workforce demographics.