You cannot pay employees as contractors as that is against the law. If they are truly contractors that work on specific projects on their own schedule then yes you could. If they have to show up at a specific time and fill a specific role then you cannot pay them them as 1099.
I am curious about what your insurance plan covers and if we would get better rates via a PEO since it is a bigger group? We are currently on a high deductible HSA plan. We basically have about $5500/person out of pocket before everything is fully paid.