Category Archives: Employee Benefits Distribution

Redefining Employee Benefits


When it comes to the benefits brokering business you get people or companies labeling themselves in many different ways. When I started in the business the common title was a Group Insurance Broker. Some added the label “Consultant”. Over time the term changed to Employee Benefits Advisor or Employee Benefits Consultant. I guess in the end you can call yourself whatever you want but the market really doesn’t care. What an employee values as a “Benefit” to working at some employer is something that is personal to that individual. The consumer or customer, or in this case an employee, will determine for themselves what is a benefit and what is not. Even the employer may be offering “benefits” that their employees don’t value much as a benefit to working there.

I think we are in the middle of a redefinition of what Employee Benefits is. A 23-year-old entering the workforce with a ton of college debt more than likely does not view a health insurance plan with a $3000 deductible as much of a benefit. Most don’t see themselves incurring claims over $3000, and if they did, they don’t have the $3000 in the bank to pay the deductible. My son is that 23-year-old and that is what he and his friends told me when I asked them. Granted, this is not a large sample size.

Mark Bertolini, CEO of Aetna, who has implemented some of the most progressive employee benefits programs for their employees says, their goal is to help employees be “happy, healthy, and economically viable”. Not a bad objective, and I would assume this would help their employees be more productive. I think most people strive to be happy, or at least happier, so helping people be a little happier is a worthy goal.

When a 25-year-old single mother with no money in the bank has her refrigerator break down that is a bad day. When a 40-year-old has their spouse ask for a divorce unexpectedly that is a bad day too. And when your 87-year-old father has dementia and needs to be put in a nursing facility that is a bad day for you and your 89-year-old mother who is slowly losing her partner. These bad days suck the happiness out of most people and this almost always leads to lost productivity at work, at home, or almost at any endeavor. It is hard to stay focused when something else consumes you.

This emerging market demand to help people through their workplace has resulted in a significant amount of capital being invested in new companies providing products and services to fill the need. These solutions include wellness, nutrition and smoking cessation programs, financial fitness, college loan payment support, employee loan programs, help with bad credit, and more. At Aetna, they promote yoga and pay employees to sleep more in additional to many other programs. Aetna claims that these programs have saved them millions of dollars through improved employee productivity and a reduction in sick days. This is certainly a different employee benefits world.

For employers, the idea of providing a benefit to employees should be a good thing. Who doesn’t want healthy, happy, financially viable, and productive employees? For many though, the number one employee benefit, health insurance, has become a necessary evil that still leaves employees with a financial burden. And what employer wants to come to work and worry about managing the health claims of their employees to keep down costs and maintain profitability? You would think they already have enough to do running whatever business they are in. In addition, they are essentially delivering “bad news” once per year when they raise employee contributions. This change has made health insurance much less of a benefit. And many people believe that it is rising health care costs that is holding back salary increases. So, indirectly, employees are really paying for the health insurance through lower incomes.

As these “new benefits” enter the market there are challenges. Employers aren’t sitting there with the budgets to provide all these solutions. HR departments, that are already strapped for time, don’t have the capacity to evaluate, purchase, communicate, and administer such programs. And many programs only address a subset of a population. A 48-year-old overweight diabetic has different needs than a 23-year-old triathlete with no money who just crashed his car. Meeting the needs of a broad employee population is not easy. While today these may be new ideas, there may be a day in the near future when this will be an expectation of employers.

Helping employers meet the needs of this changing market is an opportunity that can also be exciting. The idea of helping someone have a “better day” because you provide an outlet for an individual that has some immediate need, can be rewarding. But, as stated above, this is not easy. As the definition of employee benefits is redefined, it may also redefine what people call themselves who serve this market. It may start separating the traditional Group Insurance Broker/Consultant from those providing redefined Employee Benefits Consulting. Those lines are blurry today. They may not be in the near future.

What is the Speed of Your Benefits Business


I often wonder why the benefits world is so slow to advance new ideas and new technology. I have been in the business for over 30 years yet have seen very little evolution relative to other industries. In my personal life, almost everything has evolved. The way I do my banking, communicate with friends and businesses associates, book an airline ticket, turn lights on and off in my home, pay at Starbucks, or get around a city, have all changed. Things are easier. Yet, for the most part, the benefits business is almost still the same as it was when I got in the business in 1986. Up to this point lack of change has not significantly impacted those in the business. I think that is about to change.

I started my career in finance at General Electric where the CEO, Jack Welch, was good at putting things in perspective. One quote has stuck with me and that is as follows:

“If the rate of change on the outside exceeds the rate of change on the inside, then the end is near.”                                  Jack Welch

Since I have been running a business I have heeded that advice. We try hard to change with the times and it isn’t always easy. I would say it is never easy. But we haven’t sat still.

With all the attention to health care and health insurance in the U.S. I have spent a great deal of time researching the market so that I can make an educated guess as to where the market is headed. What I have seen is that the outside world, (outside of the current benefits market including carriers, brokers, TPA’s etc..) is moving much faster than the inside world. If you only looked on the inside; at broker and carrier conferences; read benefits magazines or blogs; or listen to one’s buddy in the business; you would miss what is going on outside. The outsiders don’t care about the insiders. Unlike the past 30 years, new technologies, new business models, significant capital, a populace looking for better solutions, and government debt that is unsustainable, are the catalysts for change that exist today and not at any time in the past. Things are different.

A changing health care market is right under everyone’s nose yet many don’t see it. The Apple Watch, an Amazon Echo, Bitcoin and Blockchain technology, Artificial Intelligence and machine learning (highlighted on 60 minutes) all can be the foundation for huge changes. Never mind simple things like video conferencing, online chat and text messaging, and bots.

A few years ago, some benefits organizations started pushing Private Exchanges as some new idea. I wasn’t buying it. I sold similar plans in 1987. Many think they are offering some game changing idea, but most are simply different packaging of the same thing.

In the benefits business, small brokers may not have the capital to make the changes needed to keep up with the outside world. Many larger firms appear to be building moats around their businesses hoping the outside world won’t touch them. And as the old saying goes, it takes a long time for a big ship to change its course. The outsiders will just go around or over the moat anyway.
One doesn’t need to invent everything to have a sustainable business in a changing market. You may be able leverage the tools or resources invented by others to compete effectively. But all this change is not easy. Yet we all know that “Hope” is not a strategy.

So, look around and not just at your competitors or at some broker conference. When your Apple watch gives you your pulse. When you talk to your Amazon Echo. When you video chat with your son or daughter. When you turn on the air conditioning in your house from work. Wonder why this isn’t happening regularly in the benefits business. Is the outside moving faster than your inside? If so, well hoping Jack Welch is wrong is probably not a good strategy.

Webinar Invite – Taking HR to New Heights


2017_webinar_hr_without_limits_linkedin_mast33

For those employers interested, we are conducting a Webinar about HR and HR Technology that can change the way you think about HR. We guarantee you will hear a perspective on the market that will get you thinking. We have done this live and employers have said, “You made 4 or 5 points that I have never heard before.”

The market is changing and the opportunity to “Take HR to New Heights” exists. The problem is most employers don’t get there because of all the obstacles in the way. We analyzed the market and identified 54 obstacles to success. This webinar will expose those obstacles and provide an action plan to take HR to New Heights.

If you would like to attend please click on this link. REGISTER NOW . This is reserved for employers or partners of ProHCM only.

The Southwest Approach to HR and Benefits Technology


Recently I flew from Boston to Ft. Lauderdale on a Boeing 737 with engines made by General Electric. I had a window seat, Wi-Fi, and I got a Diet Coke on the plane. I reached my destination comfortably and on-time. A few weeks prior to that I flew on a Boeing 737 with GE Engines from Boston to Chicago. I had a window seat, Wi-Fi, and a Diet Coke. I was much less comfortable and my flight was 45 minutes late. Boeing was terrible on my Chicago trip.

What is wrong with my last statement? The experience I had on my first flight was from Southwest Airlines and the second was Delta. The technology these airlines used was, for the most part, exactly the same. The experience however, was much different. Boeing was not responsible for my expected outcome. Southwest and Delta were.

Southwest entered a business with non-proprietary technology and managed to shake-up the industry and become one of the most profitable airlines year-in and year out. They looked at every part of the airline business process and changed things that got in the way of achieving their main objective. This lowered costs, made flying more affordable, and improved outcomes while enabling them to be profitable. They didn’t really invent anything. They simply applied new processes to a business that was ripe for a change.

The same opportunities exist in many industries where the technology is simply the tool. Company A creates a product and other companies either use it for their business as Southwest does or they resell, implement, and service some technology. The differentiator in the end isn’t the technology, but the services around the technology.

In the HR and Benefits business many service providers including benefits brokers seem to be missing this concept. They think they have to bring employers the best “aircraft” versus understanding the service model needed to provide better outcomes. The result of focusing on the technology is a lack of understanding of the services.

Another misperception when it comes to technology is the cost. In many industries, the cost of the technology is small compared to the cost of making it run the right way and supporting it. When I fly from Boston to Chicago the majority of the costs are for things other than the aircraft. I saw a statistic that said the cost of the aircraft itself on a per person basis was around $30 per flight.

When it comes to HR and Benefits technology these same rules apply. The cost of the technology often pales in comparison to the cost of implementing, supporting, and operating the system. Yet many are still focused on the cost of the technology. I regularly replace low-cost benefits enrollment systems that actually drive costs up because of all the necessary workarounds because the technology lacked functionality. If I need to fly from Boston to Chicago a single engine plane would not be the optimum technology.

So, when it comes to Benefits technology you must ask yourself, are you Boeing or are you Southwest? Or are you neither? Are companies like ADP, Paychex, bswift, or Namely, more like Southwest or are they Boeing? Or are they both? Maybe trying to be both is the problem.

The HR and Benefits technology business, and maybe the benefits business as a whole could use a little Southwest. While your competitors are looking for that better jet the opportunity to help the employer in their journey is much greater. You can even drive down costs more by understanding the process than beating up some technology vendor. The result can be lower costs and better outcomes. Who doesn’t want that?

“Alexa – What is my deductible?”


When it comes to adoption of technology simple is most often better than complex. Steve Jobs and Apple went to great lengths to make their products simple. Without user adoption products fail. Current technology trends continue the move towards simplicity with the advent of artificial intelligence and personal assistant tools like Amazon’s Echo and the Google Home. Before you know it, these tools will enter the benefits world. The question is, who is going to be first and best? And if I am a benefits broker how does this impact my business?

While many brokers are aware of the vendors that call on them or have tradeshow booths at industry conferences, I believe the benefits technology race is going to heat up with new competition entering the market. These new competitors see the market opportunity to automate large segments of our economy including health insurance and health care. You may have heard of some of these companies like Microsoft, Google, Salesforce.com, and Apple. This would be in addition to current leaders such as ADP and Paychex. The stakes of the game will change and the price of entry, from an investment standpoint, is in the hundreds of millions of dollars. Those with the capital will quickly outpace those with less capital.

Don’t be surprised when you start to see major mergers and acquisitions in the HR and Benefits space. Could Microsoft buy Ultimate Software? Why not? They already purchased LinkedIn and recently hinted at getting deeper into the HR space.

When I look at products like the Amazon Echo and Google Home I see products that have very quickly grabbed market share with high rates of adoption. My wife, who is not an early adopter of technology, quickly became a user of Google Home. Why? Because it is easy. Would she have a better understanding of her health insurance if she could simply ask Google? Absolutely!

Benefits technology, on the other hand, has not had broad adoption by employees. Yes, employers have bought systems or brokers have given them away, but when you look at utilization on the employee side it is abysmal. I believe the reason for this is because there is not enough value as a stand-alone solution to generate broad adoption. Keep in mind that the majority of people hardly use their health care in a given year so there is little need to access such a system. I don’t know about you but I can hardly remember the login to my computer never mind something I may not use for 6 months.

The next generation of technology in the HR and Benefits area is going to have broader and “everyday” value, while being much easier to use. Market leading vendors, especially those with a great deal of capital, will invest in the latest technologies to try and win the technology race and gain more customers. And before you know it you will be saying the following:

“Alexa, is Dr. John Smith from Boston in the Blue Cross network?”

“Ok Google, request Friday off from work?”

“Hey Siri, how much does the average office visit cost?”

“Alexa, what is the balance of my 401k?”

“Ok Google, transfer $500 from my savings to checking?”

The advancement of technology and artificial intelligence has enabled many to have more personalized user experiences. Your Amazon Echo will “get to know you”. Maybe in the near future your doctor will get to know you a little better too.

Many benefits brokers have chosen some technology vendor with a mission of putting as many clients on the system as possible. This is a risky position competitively as more advanced solutions from highly capitalized companies come along. I don’t know many sales people or business owners in any industry who like running around with the 8th best product. Even more so when it is not necessary. The market and your customers do not care if you have invested thousands of dollars on some technology that may quickly fall out of favor.

One should take the advice of Jack Welch, ex- CEO of General Electric who once said,

“If the rate of change on the outside exceeds the rate of change on the inside, the end is near.”

For those that have purchased the Amazon Echo or Google Home you don’t have to look far to see that the outside world is changing faster than the inside. The health insurance and health care industries often feel like they are moving at a snail’s pace. Private Exchanges were lauded as change when they really are a reincarnation of cafeteria plans from the 80’s.

With the Trump administration, changes in health insurance legislation may create a shift that empowers the consumer. The industry may need an army of people on the front lines to help the industry move to a whole new paradigm. The vendors will need help and the employers and employees will need it too. The technology is there. Alexa is ready. Are you?

Your Competitors May Not Be Who You Think


This past week there were two press releases related to the benefits brokerage business that were fairly significant. One of them was picked up by the industry publications, generated some kudos on LinkedIn, and created some noise in the benefits community. Brokers were talking about it and many emailed me or called me to see what I thought.

The other one went mostly unnoticed in the benefits world. The industry pubs didn’t pick it up and I did not get a single phone call asking my opinion. Yet, from my perspective, the second press release will have a greater impact on the average benefits broker than the first.

This contrast made me think of a quote I keep on my wall that reminds me to not be complacent. It is from Jim Keyes, the former CEO of Blockbuster Video, who once said:

“Neither RedBox nor Netflix are even on the radar screen in terms of competition,” he said. “It’s more Wal-Mart and Apple.”

We all know how that turned out.

The first press release announced the merger of 20+ benefits firms, many who I know. While this is noteworthy, I am not sure that the world is any different today because of it. Yesterday they were wearing one uniform and today they are wearing another. They are the same people, in the same locations, and until there is some other new big announcement they are probably doing pretty much the same thing today that they were doing yesterday.

From a competitive standpoint, I am pretty sure this event won’t change the landscape much. Most brokers are already competing with larger firms that use their size and resources as their competitive advantage. Some brokers may even think this is good for them competitively because their market just lost another boutique firm and the competition of local boutique firms just got smaller. In reality, not much has changed until someone brings something new to the market.

The second press release was from a company called Namely. Namely raised an additional $50 million in capital bringing their total capital raise to $157.8 million. (Source: Venture Beat January 5, 2017) Concurrently, Namely also announced the following:

“Namely also announced today a new benefits offering called the Namely Health Advantage, which groups together similar companies to offer their employees health benefits at preferred rates.”

What makes this significant is that Namely has brought something new to the market. They have developed an engaging HR-Benefits-Payroll platform promising simplicity and ease of use. They also act as a benefits broker, creating a single source technology and service offering to employers. And as can be seen from the quote above, they created a new health insurance offering for their clients.

Namely claims to have 650 clients totaling 120,000 employees which would be an average client size of around 185 employees. Unlike companies like Zenefits, that targets much smaller employers (< 50 employees), Namely targets mid-market employers ranging from 100 – 1000 employees. From a competitive standpoint, this is the sweet spot for many benefits firms.

If you do the math and assume they are generating revenue at a $25 per employee per month rate, then their annual revenue would be in the range of $36 million. This is a real rough guess. Even if I am off by $10 million it would not be bad for a company that was founded in 2012. That would make them one of the fastest growing benefits brokers in the country. Though I am sure they would not classify themselves as such.

In 2015 there was $2.4 billion invested in HR Technology type companies. And as one industry analyst said, “Do you know what they will do with that money in 2016 and 2017”? Spend it. They will spend it on marketing and sales. They will have Ads on LinkedIn and Google. They will be at all the HR trade shows. They will be everywhere marketing to your customers and prospects. Namely has even had TV commercials on Fox News. I don’t see many brokers advertising on TV.

I could imagine asking the average benefits broker about their competition and it would not surprise me if they responded as follows:

“Neither Namely nor Zenefits are even on the radar screen in terms of competition,” he said. “It’s more Gallagher, Mercer, and USI.”

You may not have recognized this competition yet. Many brokers say they never lost a case to Namely or similar companies. What they don’t know is how many prospects they lost to these firms. How many employers looking for solutions found Namely but did not find you? How many prospects would respond to their value proposition versus yours? Do you even know what their value proposition is?

There is a way to meet and beat this new competition. But is takes work, planning, investment, and risk taking. Or maybe these firms are really nothing to worry about. Ask Jim Keyes what he thinks.

It’s a Saturday night and I should go. I could end this article by saying I am going to be watching a movie on Netflix tonight but playoff football is on, and anyone who knows me would know I am lying. But if you want to learn about these new competitors and what you can do to compete with them, check out our latest webinar titled, “The Future of Human Capital Management and Benefits” by clicking on this link.

Webinar Invite – Taking Benefits and HR to the Next Level in 2017


I know, another webinar invite. This is a really good one though. If you are a benefits broker I guarantee this is worth 45 minutes of your time. Here is the bottom-line with this webinar. We have been delivering technology solutions to both brokers and employers for 16 years now and have seen gaps in the market over that time that are actually being magnified now as the market changes. Many brokers and most employers are often not recognizing those gaps. We think that by filling those gaps you can take an employer’s HR from a 3 to a 9 and improve a broker’s operation in similar ways.

In this webinar, we will share some but not all the secrets. We then introduce a model that we think is quite unique.

The dates are: January 5th, 10th and 12th at 12:00 – 1:00 Eastern Time

If you are a broker and have an interest in attending feel free to click on the link below to register. If we don’t know who you are we may give you a call before approving access to the webinar. Thanks.

Register Here