Health insurance may be one of the hot-button issues of 2017, but it's long been a source of frustration for small-business owners. Figuring out what you want to provide to employees, what you're legally required to offer, and how much it will cost can become your "single biggest pain," as Peter Zdanowicz, chief operating officer at financial startup GoldBean, puts it.

Fortunately, there is help at hand, a bit of aid Zdanowicz and many other business owners have embraced. It's called a professional employer organization, or PEO.

Professional employer organizations are firms that specialize in providing human resources services to other businesses. A company agrees to allow a PEO to process its payroll, and, in turn, the PEO becomes the employer of record for those employees. With thousands--sometimes hundreds of thousands--of "employees," PEOs are able to offer their member companies everything from health insurance to retirement benefits at much better prices than are usually available to standalone smaller firms.

According to market-research firm IbisWorld, the PEO industry grew at an annual rate of 8.7 percent from 2012 to 2017, thanks in part to its health care offerings. "PEOs have been gaining in popularity since the advent of the Affordable Care Act," says Adam Hyers, owner of Hyers & Associates, an insurance brokerage based in Columbus, Ohio.

In the United States, the law--at least as of presstime--says that any business with 50 or more full-time-equivalent workers for one year or more must offer health insurance. And about half of businesses that aren't legally required to give their workers the option of signing up for coverage offer it anyway. "It's a necessary benefit to attract the team we want," says Mickey Swortzel, co-founder of Ann Arbor, Michigan-based New Eagle Consulting, which employs 25 people.

But it's difficult to offer your employees the equivalent of large-company health benefits: Since you're not bringing insurers a ton of business, they may charge you a lot for the most attractive options, effectively relegating your company to plans with high deductibles or few out-of-network options. That can cause problems hiring or retaining talent. When new employees "sign the papers and see a $10,000 deductible, they are not happy," Zdanowicz says.

Swortzel began using ADP, the industry's largest PEO, in 2016. "My employees and their families," she says, "saved about $5,000 a year" on health insurance. She also spent less on human resources, as the PEO's administrative costs were less than the cost of hiring an HR person.

However, keep an eye on those administrative costs. PEOs usually charge companies a fee per employee or a percentage of payroll; rates vary depending on the number of employees and the services being rendered. GoldBean pays its PEO, TriNet, about $83 every two-week payroll period for each of its five employees, or about $830 per month. "It adds up," Zdanowicz says.

So if your company is growing quickly, you may find it makes more sense to handle your own health insurance and HR decisions. Online career coach the Muse, which went from 65 employees to more than 120 in the past year, recently hired Shannon Fitzgerald as its head of human resources. She weaned the Muse off its longtime PEO and went through an insurance brokerage to offer employees several health plans for 2017. As Fitzgerald warns, "You reach a point where you end up throwing money away at a PEO because of the size of the company."

FROM THE OCTOBER 2017 ISSUE OF INC. MAGAZINE