Category Archives: Employee Benefits Distribution

There is a Ghost Lurking in the Benefits Broker World

Posted on September 2, 2014 | 1 comment

There is a ghost lurking in the benefits broker world. Many brokers are chasing it. I hear about it all the time when speaking to brokers. Yet, nobody can find it. Many claim to have seen it. Others claim to be the ghost. But I have yet to find it.

Is there really a ghost or is it in everyone’s imagination? I have come to the conclusion that this ghost is not a ghost after all. It is an idea. It is how to be different. Brokers are looking for that one thing that when they go out to a prospect and say let me show you something, everyone will want it. Many, many brokers are looking for this “ghost”. And most are still searching. They are searching for this dream or hope to find that silver bullet – that one thing that will separate their firm from their competitors that few can find.

The vendors calling on brokers know they are looking for this ghost or silver bullet and they promise to have found it. “I got the silver bullet”‘ the vendors promise. “I have that one thing where if you partner with me your dreams will come true. Prospects will flock to you. Just sign here and give me $1500 per month.” I hear this claim all the time. And brokers call me up and say “What do you think of so and so?” I ask, what are you looking for? I get no answer. It’s like they are looking for some undetermined thing. They take the meeting with the vendor. They spend the hour and a half and see some demo. But they can’t tell me what they are looking for. It’s a ghost.

Some brokers think they found it. They show me some technology or claim to have some unique service. I look at the technology. I understand the service. But I don’t see the silver bullet. They have not found the ghost. They are paying the $1500 and have shut down their search because they have found it. Or at least they think so. They want me to say it is the silver bullet but it isn’t so I can’t. And the search goes on.

You see the ghost is not a Private Exchange, or some technology. It is not compliance alerts or wellness newsletters. It is not a HR Call Center or some web-based HR Library. The ghost is inside you. It is an idea yet to hatch because most are looking for someone else to deliver it. I personally believe there are many opportunities to be different. To rattle the market in a way where people will start talking. But it starts with the person in the mirror. So my message is stop chasing the ghost. The vendor that knocks on your door with that great idea is knocking on everyone’s door. There are big opportunities to make this benefits world better. But one must start on the inside and not out. As Mark Cuban once said, The best way to predict the future is to invent it.”

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Posted in Agency Operations, Employee Benefits Distribution, HR and Benefits Technology

Benefits Is Going Mobile – Is Your Benefits Firm Ready?

Posted on August 20, 2014 | Leave a comment

I have had a few experiences over the past few months that have convinced me that Employee Benefits is going to go mobile faster than most may believe but not in the way most benefits brokers would think. My first experience was with my own staff. We launched a web and mobile system to manage our HR, Benefits, and Payroll on July 1st. What was amazing is that 100% of my employees used their mobile phones within the first 5 weeks to request a vacation day. What was more interesting though was that my employees all of a sudden became more aware of their benefits. One individual commented that she did not know the company provided disability insurance and another mentioned how he went to the doctors and forgot his medical card and then remembered seeing the benefits button on his Smartphone. What I found most interesting is that none of my employees went to the smartphone to see what their benefits were. They went there to request a vacation day and “bumped into” the benefits button.

The second experience started with me seeing a statistic (that I can’t find now) that said that 60% of the American workforce did not have internet access or email at work. As an office worker myself in a predominantly office based market that did not seem realistic, but I saw that stat when I was at a conference in Vegas. And if you walk around the casinos in Vegas it is easy to see how this stat could be true. So I decided to test this stat when speaking at a conference just yesterday in Richmond, VA. I was speaking about HR/Benefits technology to an audience of HR people from various employers. I first asked the audience “if you had something real important to communicate to your employees how do you do it?” One woman answered that she sends an email. I then asked the crowd to raise their hands if their employees don’t have a work email. Half the audience raised their hands. I followed this by asking what percent of their workforce they thought owned a Smartphone. Almost all that answered said they thought all their employees owned smartphones.

If you add these two stories together it draws a picture of how employers are going to communicate with their employees and how employees are going to access information. It is going to be same the same way we all do in our personal lives and that is via smartphone apps and text messaging. The thing about smartphones is that they are always with us. We stare at them when we kill time at a doctor’s offices, during commercials when watching television, and between innings of our kids baseball games. We consume information on our smartphones because it is easy.

I started this by saying benefits is going mobile but not in the way most benefits brokers would envision. I would imagine benefits brokers would look for some standalone benefits mobile app. However, when you actually look at how employees utilize their benefits few employees use their benefits beyond an office visit or getting a prescription in any year. So, remembering where to find information one almost ever needs is a challenge. I saw a stat the other day where the average American has 18 users names and passwords in their lives. How are employees going to remember a user name and password to some app or website they never use? The answer is to put the benefits information right next to something employees use frequently such as requesting a vacation day. For this reason deploying a solution that has everything an employee would need from their employer in one spot is the best way to communicate benefits to employees.

Now let’s quickly address text messaging. Imagine I am an employer and I have 30 people that did not go online to enroll in their benefits and there are only 3 days left to enroll. For 50% of employers their employees don’t have a company email. Wouldn’t it be real easy to send these employees a text message? We all text in our personal lives because it is a quick and easy way to communicate. I believe text messaging will become a common form of employee communications in the near future.

The opportunity exists for benefits brokers to take a leadership position by helping employers realize this opportunity to leverage mobile and text messaging to improve the way employers administer and communicate benefits. It simply makes sense. So, let’s go!

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Posted in Employee Benefits Distribution, HR and Benefits Technology

Here is What a Private Exchange Is and Isn’t

Posted on May 10, 2014 | Leave a comment

Over the past 9 months I have been speaking at conferences or sitting on panel discussions where the topic was Private Exchanges. In some cases the audience consisted of employers and other times the audience was filled with benefits brokers. On each occasion I asked the audience the question, “What is a Private Exchange?” In all circumstances there was never any agreement on what a Private Exchange was. Yet in my presentation I highlight several studies one which says over 70% of employers would consider switching to a Private Exchange. I am wondering what these employers thought a Private Exchange was when they were answering the question. Seventy percent of employers want something that nobody can agree on what it is. And just the other day I was asked by a broker if I could help them respond to an RFP where the employer was asking if the broker (who is supposed to be an independent advisor) had a Private Exchange.  I can’t imagine what response we would get if we asked the employer to define what they meant by a Private Exchange? I think if the broker asked she would not get the business so I did not advise she ask. What I do know, whatever a Private Exchange is, the broker needs to have one. Maybe she will have a better chance to get the business if she had 3 or 4 Private Exchanges. Who knows?

So I am going to define what a Private Exchange is and isn’t. Maybe it will start right here where we all will begin using the same language to describe what these new benefit offerings are or aren’t. One may ask who anointed me the king of defining this. My last name is not Webster (as in Merriam Webster Dictionary). Nobody anointed me. But if no one is going to take the lead why not me. I don’t have a horse in the race. I am not a broker, not an insurance company, and not a technology vendor wanting to promote my technology. I also don’t sell insurance to employers. So I have no vested interest in whatever Private Exchanges are. I will say that I do understand the technology as that is my business. And I know what Defined Contribution and Cafeteria plans are as I sold them in the late 80’s. So I do have some knowledge in the area.

I am going to keep this simple. To me a Private Exchange is intended to be a Private version of a Public Exchange. The entire US population is being educated by the government, media, and other interested parties about what an Insurance Exchange is. To take the word Exchange, and make it something different from what the populace is being told an exchange is, I will say is somewhat “deceptive”. In fact, when I do ask employers what a Private Health Exchange is they usually describe it as a marketplacewhere an individual can get access to a wide range of health insurance options from many insurance companies. In my personal life I think of an Exchange or Marketplace as someplace that has many options from many companies.  I know the difference between an Apple Store and Best Buy. I know the difference between buying a product at the NIKE, SONY, or Apple website versus Amazon. And I know all you reading this do too.

So using this logic of the way the world understands the term Exchange or Marketplace then the majority of the Private Exchanges being promoted today by benefits consultants and brokers, insurance companies or technology vendors, are not Exchanges or Marketplaces. If there are not multiple products from multiple vendors available where the buyer is free to choose what they want from the menu then it is not an Exchange. Multiple products on a technology platform from the same company is not a Private Exchange. And I don’t want to hear the argument that they have Medical, Dental, and Life from different carriers. That is like saying you can buy a TV, stereo, and mobile phone from the same store but you only have one vendor option for each type of product. While there are some states where real Exchanges exist (CA and MD Small Group Markets) and they do exist for individual insurance, for the majority of the group market there are no Private Exchanges. You can offer more medical options and provide a different methodology to fund these options, aka Defined Contribution, but don’t call them Private Exchanges. You are confusing the buyers.

I’m pretty sure this article won’t stop those with agendas from calling these things Private Exchanges and I will have to advise my broker customers that they may have to play the game because they don’t make the rules, but hey, I tried.

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Posted in Employee Benefits Distribution, HR and Benefits Technology, Private Exchanges, Uncategorized

For the Record – The HR Technology Advisors Position with ADP

Posted on April 9, 2014 | Leave a comment

In today’s business world getting your message out is both easier and more difficult. With the internet, Smartphones, Twitter, Facebook, LinkedIn, blogs, and more, it is really easy to publish your message for the world to see. You type, hit a button, and it is available to the world. In that sense it is easy to get your message out. It also easier for your competitors to get their message out. The hard part is getting anyone to listen and getting someone to find your message in a world of information overload. Whether you like it or not you have to play the game. If you don’t spread your message and define yourself others will and not always in the way you want. When that happens you will have to respond. Just look at the “noise” created during a Presidential campaign. The candidates spend as much time trying to define or label their opponent as they do defining themselves.

That gets me to the purpose of this article. I am about to launch a marketing campaign that I know will be misinterpreted by the market. Maybe saying misinterpreted is the wrong word because those who directly hear my message will more likely understand what my message is. What I do anticipate is that there will be noise created by others who do not hear my message that will misrepresent my message in the market. Some simply don’t want to take the time to listen and others may have their own agenda. This article is intended to clearly state my message for those that want to understand my position as it relates to this issue with ADP.

My firm, HR Technology Advisor (HRT), is launching a big marketing campaign highlighting how employee benefits brokers can leverage ADP to deliver a Private Exchange or Defined Contribution plan to the employer market. This concerns brokers because many see ADP as a competitor. Other technology firms who we do business with will not like it because ADP is a big competitor to them and I am promoting an idea based on a competitor. To many brokers, payroll companies, and HR and Benefits Technology vendors, ADP is arch-enemy number 1. As a consultant to benefits brokers and by extension an objective advisor to their clients when choosing technology, this “perceived” favoritism to ADP may not sit well. The key word is perceived. Let me get into the details.

At a high-level some people don’t understand the core purpose of my (our- Don Rowe is my partner) company, HR Technology Advisors. HRT is first and foremost a consultant to benefits brokers. Our job is to help benefits brokers understand how technology is impacting their business; how it will impact their clients HR and Benefits; know who the players are; and help position their firm competitively in the market. And then, as a paid representative of the brokers firm, we assist the brokers with direct client and prospect situations where we help them advise their clients on HR and Benefits technology and sometimes help them get prospects by participating in prospect presentations.

This is where ADP comes in. According to our statistics at HRT, employers are predominantly looking for technology that includes either HR and Benefits functionality or HR, Benefits, and Payroll in a single platform. Many have heard me say employers don’t want one system to track vacation days, sick days, and performance reviews; another to track benefits and enroll employees; and a third to process payroll. In fact, in 2013, close to 90% of the employers we assisted wanted a system that included HR and Benefits or HR-Benefits-Payroll all in one. And according to a recent market survey we did, ADP has a 46% market share of those employers using technology for Benefits Enrollment. Paychex was second with 29% and the next closest was 7%.  So whether a broker likes ADP or not the majority of any brokers’ clients are going to be using ADP as a tool to manage their benefits. It is not a broker’s choice as to what technology an employer wants to use to manage their HR-Benefits-Payroll. It is also not our choice at HR Technology Advisors. As a consultant to employers we work with ADP more than any other company because they have the largest market share. I equate this to the average benefits broker who may work with their local Blue Cross plan more than any other insurance company. They do so because in most markets Blue Cross has more than 50% market share. That does not mean the broker is solely a representative of Blue Cross nor are we only a representative of ADP.

As a consultant to brokers we use this knowledge to help our broker clients position their firm more competitively. While many brokers are running from ADP because they think they are a competitor (We addressed this in an article written in 2009 titled, “ADP – Friend or Foe” – download at www.joemarkland.wordpress.com ) we understand the value that brokers can bring their clients by having a service model to support those clients that have ADP or want ADP. Trust me, many clients need help with their technology and most brokers aren’t delivering the help. Here are a few questions I have asked brokers.

–          Have you ever helped your client test their ADP Benefits Enrollment System for accuracy?

–          Have you ever analyzed the pages employees would be accessing when enrolling in their benefits and see how well the benefits information is presented?

–          Have you ever uploaded a 2 minute video on the ADP platform that explains to an employee what Critical Illness Insurance is?

I have never had a broker answer yes to all of these questions. Helping clients with ADP is a service clients will value.

Now in 2013 Private Exchanges hit the market. Many brokers scrambled to sign-up with some benefits only technology vendors. At the same time we continue to engage clients who repeatedly tell us they want HR-Benefits-Payroll in one system. I found this conflict between what brokers were delivering  and what clients wanting to be very interesting so I wrote an article titled “An Alternative Approach to Private Exchanges” (also on my blog) and held webinars with the same title. In my article and on my webinar I predicted that ADP will be the largest Private Exchange technology vendor within 2 years. Not because I am going to make them but simply because more employers are using their system to manage their benefits than any other platform. So, as a consultant to brokers and employers I have helped employers figure out how to use their current ADP platform as a Private Exchange of Defined Contribution plan. Why? Because that is what employers wanted. They did not want to use another system simply to provide their employees with more medical options in a Private Exchange. So we worked hard with ADP to develop a model using third-party technologies, content from insurance companies, and internal programming resources to help employers leverage their ADP system as a Private Exchange. My marketing campaign is designed to bring our methodologies and message to the market so that employers can get what they want and the brokers that deliver this solution a competitive advantage.

I want to finish this by addressing the other technology vendors we have worked with at HRT. As I have stated we represent the brokers interest and by extension their clients. We have sold and implemented solutions from many vendors and there are many great solutions in the market. Yes, ADP has 46% market share, but they don’t have the other 54%. That being said I had one vendor ask me why I am doing this with ADP and not them. My simple response is because nobody asked. If a HR-Benefits Technology vendor does not offer the ability to administer a Private Exchange simply ask and I will show you how.

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Posted in Employee Benefits Distribution, HR and Benefits Technology, Private Exchanges, Uncategorized

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Do You Want Wellness Newsletters or Do You Want a Competitive Advantage?

Posted on March 15, 2014 | Leave a comment

I was making a presentation to a brokerage firm a few years ago about how they can position their firm more competitively in a rapidly changing environment. In the middle of the presentation one of the producers asked me a question and that was, “Do you have Wellness Newsletters”? It was an odd question at the moment because it came out of left field but it was indicative of what was going on in the benefits brokerage community. With the benefits brokerage business being somewhat commoditized and more competitors entering the space benefits brokers have been looking for that “silver bullet” –  that one thing that they think could separate their firm from the pack. That silver bullet that can help them attract new business.

Vendors have capitalized on the benefits brokers desire to find the “silver bullet” so their advertisements and sales pitches promise a “competitive advantage”.  Then they say you better buy/sell their product or the broker down the street will first. And of course when that broker buys in, you, the procrastinator, the indecisive one, will lose.

That gets me back to this producer who asked me for Wellness Newsletters. My response to his question was, “Do you want Wellness Newsletters or a competitive advantage?” Somewhere along the way he was sold the idea that Wellness Newsletters was something he needed and that would give him a competitive advantage. And of course the broker down the street was offering their clients Wellness Newsletters. He responded to my question by acknowledging he was looking for a competitive advantage. The marketing machine of some company had convinced him that Wellness Newsletters was a competitive advantage. I can tell you Wellness Newsletters are not a competitive advantage. In fact my benefits broker emails me a Wellness Newsletter every week. I immediately hit “Delete”. First, I never asked for them and he never asked me if I wanted them. They just started to show up. Second, I already subscribe to a WebMD Daily Newsletter and I don’t need his.

This gets back to the bigger problem for benefits brokers. For the past 10 years they have been sold a “competitive advantage”. First it was benefits websites, then Wellness Newsletters and Compliance Alerts, now it is online HR Libraries, and HR Call Centers. All cost the broker money and none of these solutions delivers a relevant competitive advantage. Usually, within a short period of time, every broker is offering the same thing – it doesn’t generate any new business – and they are saddled some multi-year contract and ongoing expense. While the broker was looking for some way to tie the client to them it is the broker who actually is the one being tied down or handcuffed to some vendor.

So what should a broker do? First I would say start with solving real client problems. Don’t follow the guy down the street. Think logically and don’t respond to every sales pitch or press release you see about how some broker is doing some grand thing. Ask your clients what they want and make sure they know you are the resource to solve their real problems. By approaching the market in a thoughtful way and by doing proper strategic planning you will feel secure with your market position and not have to worry every time you here of some wild promise of some grand thing.

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The Coming Obsolescence of Stand-alone Benefits Enrollment Systems

Posted on December 23, 2013 | 1 comment

Let me start by saying that I realize the title of this article alone is going to be met with objections and criticism from many in the benefits technology business, some of who are my friends. It is also not something that I wish upon the industry. But as a consultant to the industry I have seen the trends for some time and the time has come to declare that the demise of stand-alone benefits enrollment systems is in sight. And it is time for all who either own such a system, sell such a system, or use such a system to prepare for the inevitable.

The beginning of the end started in 2006 when ADP acquired Employease, which at the time was one of the largest benefits enrollment vendors in the space. This was followed in 2007 by the acquisition of Benetrac by Paychex. These leading payroll firms made these acquisitions not because they wanted to be in the benefits enrollment business, but because they recognized the opportunity and the increasing market demand by the employer market for a single system to manage HR-Benefits-Payroll. Since that time they have quickly become the leading benefits enrollment companies in the U.S. with ADP controlling approximately 45% of the market and Paychex 26%. [i]

While I recognized this trend as early as 2002 I first wrote about it in an article published in Employee Benefit Advisors magazine in September 2009 titled, “Payroll Firm, PEO’s, and BPO’s Have Got it Right”. (See this in the Article Section in my blog at https://joemarkland.wordpress.com/past-articles/) In this article I pointed out that employers would be looking for a “single system that stores all HR, benefits and payroll information”.  Many employers don’t want one system to track someone’s pay, another to track benefits, and a third to track someone’s vacation days, performance, and other data that an employer may track on an employee. Employers don’t want to makes changes to 3, 4 or 5 systems if an employee simply changes their address. And “for employee self-service, accessing one system to see all pay, benefits and time-off information is much more user-friendly”. I often compare this merging of systems to the iPhone. At one time I had an iPod, a camera, and a cell phone. Now the iPhone and the rest of the smart phone market has all three features in one.

At the time I had written the article and on many occasions since I have claimed that the transition to a single platform would occur in about 5 years. We are now a little over three years since the article and based on recent market activity and my assessment of that activity, I still believe this to be true. My belief is based on statistics gathered from my own company’s customer base. As an HR and Benefits technology advisor to benefits brokers, and by extension their clients, we conduct needs assessments and recommend HR-Benefit-Payroll solutions to employers. They use this analysis to make purchase decisions. We work with anywhere from 20-40 employers per month and have been doing so for about 10 years. Over the last 36 months we have seen a huge shift in demand with stand-alone benefits enrollment systems moving from 55% down to 10% of our activity. The following chart shows our data as to the type of systems employers have been requesting in our assessments.

Benefits Enrollment Only

HR-Benefits-Payroll

2011

55%

45%

2012

35%

65%

2013

10%

90%

The HR-Benefits-Payroll column in the above chart may represent systems that either are HR and Benefits or HR-Benefits-Payroll. Keep in mind that we are introduced to these employers by benefits brokers, so one would think the statistics would lean more to benefits enrollment only systems. That is not the case. Employers, by a 9-1 ratio, are predominantly looking for a single system. This statistic not only plays out for new customers. We are also witnessing a significant migration of existing clients that use benefits enrollment systems convert to a single HR-Benefits-Payroll solution. Over 95% of those that have changed systems have transitioned to a single platform.

Other than the obvious, which is the employer’s desire for a single system, I attribute this rapid conversion to the following:

  1. Increase in number of vendors – Any competitor to ADP or Paychex has had to develop similar capabilities. While some are still evolving, the number of vendors offering these capabilities has grown tremendously creating a greater awareness in the market while giving employers more options
  2. Reduction of HR Staff – Employers want to the reduce costs related to corporate overhead. HR is one area. Therefore efficiency in HR by leveraging technology is a goal for many employers.
  3. Compliance – HR and Benefits is getting more complex. Employers need to organize their data to stay compliant. The reporting needed for the Accountable Care Act is an example of this. Payroll Companies have led the way here with this type of reporting.
  4. Employee Self-service – Employers do want to expand employee self-service in an easy to use way. A single point of entry to all HR-Benefits-Payroll information provides a better and easier employee experience while reflecting well on the company.

Many benefits brokers and benefits enrollment companies will debate these statistics. Around the industry benefits enrollment vendors are having an outstanding year in 2013. I expect 2014 to be just as promising. I believe this can be attributed to several reasons. The first reason is that many benefits enrollment systems are either fully funded or partially funded by benefit brokers and/or insurance companies. Brokers and carriers continue to use technology and what I call “giveaways” as a differentiator or to sell product. In the past it was benefit websites. Today it is benefits enrollment systems and HR Call Centers. These free or discounted systems and services creates a false perception of market demand. Many of these systems were implemented without ever having gone through an analysis to determine employer needs. Why should they, in many of these situations the employer is not making a purchase decision. It is the brokers, carriers, or whoever is funding it that is the customer of the benefits technology vendor. I would estimate that close to 50% of the stand-alone benefits enrollment systems are funded by some third-party.  Of systems my firm has implemented that number is closer to 75%. Competition in the benefits brokerage business has increased the number of “free” enrollment systems but this does not represent a real increase in employer demand for such systems. Give away anything for free for a day and I will show you an increase in demand.

Now along comes health care reform and the threat of reduced compensation from medical insurance. How many stories have you read about how a broker can make up for lost medical commission by selling more voluntary and worksite products? This push has resulted in an even greater funding of benefits enrollment technology by insurance companies that sell voluntary and worksite products.

For a while I thought the development of Private Exchanges would give the benefits enrollment companies some reprieve. I still think it may for a year or two. With Private Exchanges the technology bar has been raised and the enrollment technology vendors have had to add functionality to handle defined contribution plans and provide decision support tools to help employees make better insurance purchase decisions. In my opinion this technology edge will be short-lived as all other vendors will have to add these capabilities. In my short experience with Private Exchanges I still have found the majority of employers wanting to run their Defined Contribution Plan or Private Exchange within their existing HR-Benefits-Payroll technology. Using third-party tools I can Private Exchange-ize almost any HR-Benefits-Payroll system. With all these new employee contribution methods and the increase in voluntary products I still find the ease of making the payroll deductions a primary requirement of the employer. This once again puts the single system vendors in the driver’s seat.

My predictions come in a year when benefits enrollment company Benefit Focus went public and raised around $75 million in their IPO after showing a previous 6 month operating loss of $15.2 million[ii] . More recently Towers Watson acquired benefits enrollment company Liazon for $215 million. I think both may disagree with my labeling them as benefits enrollment technology companies but that is how I see them. That is the goal isn’t it – to enroll people in their benefits? As for the money aspect of these transactions I say “good for them”. They capitalized on the opportunity. However, neither of these events changes my opinion as to where the market is going.

If broker competition, health care reform, the push to sell more voluntary products, and the advance of Private Exchanges is creating more demand what is going to stop the advance of benefits enrollment only solutions? The answer is two-fold and includes increased employer demand on one side and the ever-growing vendor market providing the supply. In the end logic will prevail and employers will get what they want which is a single system; and the army of payroll vendors, HRIS vendors, HR Consultants, and even some benefits brokers will educate the market and deliver the solutions. I guarantee that brokers who work with me will be delivering such systems. Think of this for a minute, ADP has around 800 sales people calling on employers every day and they are just one company. Collectively there are thousands of sales people calling on employers to deliver these solutions. They will move the market.

The transformation has begun but will still take some time. In the near future mergers will happen between enrollment vendors, payroll vendors, and HR vendors to meet the market demand. Some stand-alone enrollment systems will survive to meet the needs of those clients with very complex benefits or those who want best in class solutions. This will more likely be in the 1000+ employee market, even though many larger companies such as Nokia with 50,000 employees are implementing a single system. (See http://www.computerweekly.com/news/2240210585/Nokia-Solutions-Networks-HR-rejects-best-of-breed-for-best-of-platform ) In the less than 1000 employee marketplace I predict that by the end of 2015 you will see an even larger percentage of the market convert to a single system for HR-Benefits-Payroll. If you are in the benefits business then you will have
to make some changes to prepare for this market change. Or, I could be wrong. I presented my facts so that you may decide.

[i] HR Technology Advisors 2011 Study

[ii] Street Insider August 14, 2013

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It’s Time to Simplify Benefits

Posted on December 22, 2013 | Leave a comment

Since I have been in the benefits business, either as a distributor or as a technology advisor, benefits communication has always been a problem and a topic of discussion. Brokers and employers have been developing fancy benefit booklets or creating detailed benefits statements all in an effort to get employees to understand and appreciate their benefits. Now with the advent of the web, brokers and employers have built websites and developed videos to give employees access to benefits information 24/7 often only to take them down a year or two later because nobody is using them. Trust me, I have seen hundreds of utilization reports and very few people are using these sites. Yet, after all this effort the majority of employees still don’t understand their benefits. I say enough already! Why don’t we try to make things easier? Well I have some suggestions.

Let’s start with the health insurance business. When I got in the business in 1986 many plans were still straight deductibles and coinsurance. In fact, one of the most popular products was the Guardian Insurance $100 deductible 100% plan. While I realize this type of plan was not sustainable financially, I will say it was simple. Concurrently there was the growth of HMO, PPO, and POS plans. Along with that came all kinds of copays and new rules on whom you had to see first before you saw someone else. Now there are HSA’s and HRA’s sold with high deductible plans. I think it’s funny that they call high deductible plans, Consumer Driven. Wouldn’t it have been easier if we just took a straight $100 deductible 80/20 to $5000 plan from 1986 and adjusted the deductible and coinsurance every year for inflation?

Today health insurance is very confusing and it’s going to get worse. I think my prescription drug card today has like 8 different copays. Recently I had treatment for a health condition and between my primary care physician, the specialist, the hospital, and the lab, I have so many bills I had to bring them all to the office and try to figure them out. Each bill had about 6 different figures on them. Between what they were billing, the discounts, copays, deductibles and coinsurance I could not figure things out. It’s been two weeks and the bills are still on my desk. There is no way the average American is going to figure this out. I have such a headache from this I need to see a doctor.

While I do realize the logic for creating these monster plans, it simply hasn’t worked. The health insurance business is becoming like the tax code. Everyone is manipulating the system to modify behavior. If you want people to buy more cars then you give a “Cash for Clunkers” tax credit. You want people to buy more houses you lower interest rates and give people an interest deduction. You want people to stop using Emergency Rooms you give them a $100 ER deductible. And that gets me to my prescription copays – I simply punt on that one. When I go the Pharmacy I just say “tell me what I owe you”, and I assume the pharmacy is telling me the truth. I have no idea whether the drug is name brand, generic, generic plus, or whatever new category has been created. Enough already!

Personally I think this whole country could operate on about 10 easy to understand health insurance options. As an employer and employee would I care? No. I don’t need all those options. I would bet that I could develop 10 plans that would be within 3% actuarially of every plan in America today. What I believe is that other than all the little nuances in health care plans (that nobody understands) the majority of plans in effect today are almost exactly alike. Imagine how easy it would be for employees, doctors, hospitals, etc… to understand and administer such plans. This would not eliminate competition. It would make Aetna’s Plan 1 the same as Blue Cross and United Plan 1. I would go to the doctor and say I have Plan 1 with Aetna and everyone would understand. To make things even easier I would go back to straight deductible and coinsurance plans. Obviously this is not going to happen with ObamaCare. Just think of what a $100 deductible 80/20 to $5000 plan from 1986 would look like if you adjusted the deductibles and copays for inflation.

I could go on and on with other insurance coverages. Your Spouse can buy Voluntary Life equal to 50% of the employee amount but the employee can get no more than 3 times earnings to a maximum of $150,000 when combined with the Base Life paid for by the employer. And if the employee is 65 and is subject to a reduction schedule it needs to be multiplied by 65% assuming his birthday is closer to the last renewal date than the next one. What?

If you are a benefits broker or insurance company the idea of making things easier may be considered blasphemy. I can hear all the arguments already. But one really has to honestly ask, does anyone really care about all these plan differences? Personally I don’t think so.

 

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Posted in Employee Benefits Distribution, HR and Benefits Technology, Uncategorized

What Would Steve Jobs Do if He Were a Benefits Broker Today?

Posted on December 22, 2013 | 1 comment

One of the things my firm does at HR Technology Advisors is look for new and unique technologies that can change the way employers and employees manage their HR, Benefits, and Payroll. The HR and Benefits industry, like most others, has had its share of new technology vendors offering the latest and greatest solutions that they claim can change the world. In this market, like others, there will be winners and there will be losers, but the winners may change the way things are done forever.

As a practice I conduct regular educational webinars for benefits brokers introducing new ideas that can be leveraged to generate new business and often highlight some forward thinking HR and Benefits Technology vendor. To my surprise, the most common response I get from brokers attending these webinars is “Nobody is asking me for this”. Whenever I hear this comment it makes me think of Steve Jobs. You see, Steve Jobs was the total opposite of “Nobody is asking me for this.” When I read the book about Steve Jobs by Walter Isaacson I took many notes (on my iPad) which included one of my favorite Steve Jobs quotes.

“Some people say, ‘Give the customers what they want.’ But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘if I’d asked customers what they wanted, they would have told me, ‘A faster horse!’’ People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.”

Now think back to the time you saw the first iPhone commercial. (You can see it here: http://www.youtube.com/watch?v=4acWkNihaxc ) If you were like me, then you were thinking, “Wow, I want that.” But prior to that commercial how many of you were sitting on your couches thinking that you would really like a handheld device with a glass screen where you tap on icons to watch a movie, browse the internet for a restaurant, find that restaurant on a map with a phone number, and then press on the phone number that pops up a phone so you can make a reservation? Unless you were a Trekkie (Star Trek Groupie) then you most likely weren’t “asking for this”. Steve Jobs and Apple “changed the game” and delivered something that once seen, everyone wanted. I don’t know how many people bought an iPhone right after seeing the commercial but Apple has sold over 300 million of them worldwide. Imagine they sold over 300 million of something that nobody was asking for.

Now many of you may think this is crazy to not ask your customers what they want. Don’t confuse what Steve Jobs was doing with not caring about what your customers think. This is where I am going to quote another young Billionaire, Mark Cuban. In his book titled, “How to Win” I found a quote that addresses this issue. It is as follows:

“Your customers can tell you the things that are broken and how they want to be made happy. Listen to them. Make them happy. But don’t rely on them to create the future roadmap for your product or service. That’s your job.”

There is a distinct difference between listening to your customers and driving the vision of your business. It appears that Steve Jobs, Mark Cuban, and Henry Ford share the same philosophy. And to quote Mark Cuban again:

“The best way to predict the future is to invent it.”

So if Steve Jobs were a benefits broker today what would he do?  I am not going to claim to know but I would imagine if Steve Jobs were a broker he would think of a new technology to make things easier.  He would ask himself and his team to imagine what would be the best system for an employee to access work related information. How would they purchase benefits? How could they learn about them? How would an employee transact an enrollment? How would they request a vacation day? How can they access pay information to do their taxes?  What would be the perfect system for an employee? What I do know is that if Steve Jobs built such a system people would say “Wow! I want that.”

Now I don’t think I can elevate HR and Benefits Technology to the same level as the iPhone because the iPhone’s launch was almost a “one of its kind”. Nor do I think someone has built a HR and Benefits solution that would match what Steve Jobs would have built. However, the idea and opportunity to bring something new and innovative to a prospect or customer that they “aren’t asking for” exists in the benefits business much like any other industry.

That being said, I recently did see a solution that I think if a CEO saw it they would say, “Wow! I want that.” Because I believe the majority of CEO’s want to show their employees they are forward thinking.  They want their employees to be happy, healthy, and productive. They want to be efficient and save money. They want to promote their brand and culture to their staff. They want to eliminate business risks related to HR and Benefits or for that matter, in any area of the company. And they want to inspire their employees to help move their business forward much like you may want to move yours forward.

Just imagine a system where an employee logs in and can immediately see all the things that are important to him or her. They can see how many vacation days they have left, the balance of their 401K, their FSA balance, and see their YTD pay. They can watch a video on Wellness and do a Personal Health Assessment. They could get tips on finance from Dave Ramsey and even go through a whole financial plan online. They could enroll in their benefits and do online chat with a benefits counselor. They could purchase products at a discount through payroll deduction. They could chat with their co-workers and participate in topic based discussions. They could do all this from home or work on smartphone, tablet, or Smart TV without having to log into ten places or remember ten user names and passwords. They would have just one.  Just imagine!

For someone who wants to change the way they do business and deliver this type of solution the opportunity is there today. It does take hard work and a commitment to change. It requires a vision and attitude that there is a better way. As a technology consultant I know the technology exists to get this done yet less than ½ or 1% of employers are delivering this type of experience to their employees.

The good thing about solutions like this is that CEO’s are not sitting on their couches watching commercials promoting these types of solutions. It’s not because they aren’t watching TV, it’s because solutions such as this aren’t sold through TV commercials. Someone has to get in front of the CEO and show them. And then I believe they will say,” I want it”. The question is who will show them first.

So if Steve Jobs were a benefits broker today what would he do? Well one thing I am quite sure of is he would not say, “Nobody is asking me for this”. He would find a way to be the innovator because he believed “Innovation distinguishes between a leader and a follower.” (“The Innovation Secrets of Steve Jobs,” 2001).  And I will add that being an innovator is more fun too.

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What I Want From My Benefits Broker – Or at Least Someone

Posted on December 22, 2013 | Leave a comment

I have been running a small business for over 15 years now. My last company had up to 75 employees and my current company has 20. As a small employer my partner and I have the same challenges as any other small employer. You see, as a business owner we are focused on building our company. We worry about the same things other small business owners do like generating revenue, servicing customers, and constantly looking for new ways to bring value so that maybe someday we can either sell it or grow it to the point where we could work a little less and enjoy a comfortable living.

One worry of mine, and I won’t speak for my partner, is having that “Oh $###” moment where an I was not dotted or T was not crossed and some event happened that could overnight, ruin all the hard work we had put into the company. The HR/Benefits area is one of those places. For most small businesses HR is one of those things that comes after keeping your clients happy, and after generating revenue to pay the bills, and after brainstorming about how to bring new ideas to the market. I would imagine in this area we are probably like most small companies where “after” rarely comes and most wander aimlessly forward “hoping” we are doing the right things. Because of course, nothing will happen to me and we will take care of that tomorrow.

That got me thinking about what I would pay someone to help me in the HR/Benefits area. I would like someone to come into my office and make me worry free. I want to know that from an HR perspective that my handbook is written the right way, my job offer letters are sound, that I have the right signs posted around the office, or whatever it is that I need to know or do to eliminate any risks from an HR/Benefits perspective. In this area I don’t know what I don’t know so I need someone to tell me or simply do it for me. And if I have a question I want someone to call. Don’t send me to some website with a thousand documents and have me try to figure out which 5 of the thousand I need. If that’s what I wanted I could Google it myself and I already have a job.

I also want to be efficient. I want the security of knowing everyone is on the insurance plan who is supposed to be and those who shouldn’t be should be off. I don’t want an employee to have a major health event then worry that I did not add that person to the medical plan and I don’t want to be paying for people who are no longer covered. I also want to make sure my payroll deductions are right. I know we have a problem recording all the time off the staff takes and I want an easier way because the cost of salaries is by far the most costly part of my business and I can’t afford to give away free time.

I also want to make sure we are paying people correctly. I don’t want to be overpaying or underpaying though I am sure if I underpaid I would hear about it. I also would like some assistance in determining the right market wages for my employees.

I want my employees to be happy and productive. If they have a HR or Benefits question I want them to have someone to call. It would be easier if benefits were simpler and easier to understand but that is another subject I wrote about in another blog. I also want them to have access to the information they need when they need it. I want my employees to think highly of our organization and not think we are an unorganized mess and don’t care.

My partner and I spoke about how much we would be willing to pay someone to come in and make us worry free, bring efficiency through automation and maybe save some money, and be a resource to us and our employees because, for the most part, we don’t know what we don’t know. We agreed that we would pay about 1/4 – 1/3 of the full cost of a HR person. In the Boston market that would be around $2000 – $3000 per month. With 20 employees that would be between $100 – $150 per employee per month that we would be willing to pay.

We work with benefits brokers everyday who say their commission is getting cut and that they can’t make money in the small group business. In some cases fees have gone to as low as $5 PEPM. Yet here I am telling the world that I would be willing to pay up to $150 PEPM if someone could help us.

Since I started my first business in 1997 I have had benefits brokers call me up soliciting my benefits business. They all have the same elevator pitches about how they can save money or bring better or more services. Yet, in the 15+ years I have been running a business only one company called me saying, “Let me come in a eliminate your HR-Benefits-Payroll worries. We will get you in compliance, automate your business, give your employees access to information and make them happy. We will make you look good to your employees. And along the way we will save you money. The only firm that gave me that pitch was Paychex.

Now we did not take Paychex up on it because they compete with our customers. But I will tell you that their value proposition is what I am looking for. Yet, nobody else is calling. And I would imagine that my company is not the only small company in America that has this need and is waiting for the call.

 

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An Open Letter to Independent Insurance and Benefits Agencies

Posted on December 22, 2013 | Leave a comment

There comes a time for every business when it must make adjustments, embrace change, and reinvent itself. Occasionally, circumstances arise that bring an entire industry to just such a transformational moment. For the insurance industry, and our individual businesses, that time is now.

Some may not want to believe it and others may choose to ignore it, but for all those who are in denial, they may be doing so at their own peril.

An industry in crisis 

We are at a defining moment for the independent agency system. Profits are being attacked, growth is a struggle, future revenue streams are uncertain and the result is a level of panic not seen before. The most concerning thing of all is that most agencies don’t seem to have a plan for to how to deal with the lack of control they have over their businesses.  As a result, there is an almost vulture-like strategy driving agency acquisitions, a development that seems to be gaining momentum and threatening the very survival of the independent agency system.

This isn’t just a personal opinion or observation. This is the collective opinion and observation of a group of 11 industry/agency consultants who recently came together for a somewhat unprecedented meeting. On most days, this is a group of competitors; either competing directly for the same clients or, at the very least, competing for the discretionary time and money of the same agencies. However, it was out of mutual concern for the future of the industry that this group came together in the spirit of “coopetition.” Rather than retreating into separate corners and competing more fiercely for the shrinking ranks of agencies, this group has made the decision to work together to help keep the ranks of independent agencies as large and successful as possible.

An industry worth saving

This is an unbelievable industry that has been rich with personal and financial rewards for those willing to make the investment. We are provided with great income opportunities, have more work/life balance than most other professions, work with diverse and interesting business owners, and, perhaps best of all, we have the potential to make a significant impact on the businesses of those clients.

In fact, this industry has been so generous to independent agencies that it could be argued that the generosity itself has helped create many of the problems we now face.

We do not see the demise of this industry as inevitable. In fact, this group believes the best days of independent agencies still lie ahead. We know the independent agency system can survive; however, the surviving businesses will look different than they do today. What we don’t know is how large those ranks are going to be because the change is starting with a needed cleansing of the industry, something which is already happening.

We have put ourselves in this precarious position

As we just said, many of our problems as independent agencies are self-created (or, at the very least, have been tolerated). All businesses must control two critical elements:

1.      what it is they sell to their clients

2.      how they get paid for what they sell

Because the industry has been so financially generous, most agencies have allowed those critical parts of their business to be controlled by a third party, the insurance carriers.

Also, because of the generous financial rewards provided by the industry, it has allowed agencies that deliver marginal client value to find disproportionate levels of success. We know this is a bit harsh, but if you are being honest with yourself you will agree that if all an agency does is place an insurance policy and then fix the resulting problems, they have been way overpaid. It is these agencies that have helped fuel an unfavorable stereotype for our industry and gained us little support in the court of public opinion.

It is not this part of our industry we are looking to protect and save. That would be a fool’s effort. Instead, we are looking to save those agencies who are able and willing to take control of their businesses and whose mission is to truly improve the business of their clients. That is an industry worth saving.

Now is the time to act

While we believe there is a great future ahead for these agencies, the future glory days are not guaranteed, not by a long shot. Each of us in this group has varied ideas as to how agencies will take part in that glory, but we are unified in our belief that it will require something drastically different than what has been done in the past.

And, as we all know, change is never easy and the right kind of change is rarely quick. While we also have differing opinions as to how much time agencies really have to save themselves, we are all in agreement that now is the time to get started and significant progress needs to be made within the next 12-24 months.

Focusing on the wrong target

Most would agree that this is a time of unprecedented challenges for independent agencies. Sure, some of the challenges are obvious: health care reform, exchanges, and a slow recovery from the recession, to name a few. As we talk to agency owners, it is these challenges that are getting the most attention.

However, as real as those challenges are, we don’t see those as the most critical challenges: these issues are merely exposing the underlying frailty of the independent system, a frailty that has been a ticking time bomb and whose clock is winding down.

A failure to address and correct the real issues will bring an end to the independent agency system, at least as we know it today.

Common agency challenges

Identifying those foundational issues was a primary focus of our recent meeting. The consensus of our group is that the following issues are leaving agencies vulnerable and exposed to the impact of the current (and emerging) market and industry conditions.

Too many agencies do not have an answer for these industry trends:

·         Carriers are starting to limit the number of agency contracts

·         Carriers are writing policies net of commission, leaving the agency to negotiate their own fee

·         Where commissions remain built in, they are being slashed

·         After the cleansing of the industry removes the mediocre performers, the remaining competition will be potent and fierce

·         PPACA and the resulting Exchanges will drive many smaller businesses out of the medical insurance business

·         While the commission slashing is currently focused in the health side of the business, it could be a false sense of security to think other lines of insurance are immune to reduced commission schedules

Too many agencies (both benefits and P&C) have left themselves vulnerable in the following ways:

·         There is no unique sales process. Most are still competing with a spreadsheet and look just like every other agency to the prospect/client.

·         Growth is overly dependent on the owners to produce.

·         With the owner focusing on growth, there is not enough work being done “on” and leading of the business.

·         There is too much dependency on the placement of an insurance product as the only value delivered to clients, and therefore, the only opportunity to get paid by those clients.

·         Most agencies lack a vision as to what the agency needs to become in order to survive.

·         As businesses, agencies are largely controlled by the insurance carriers. It is the carrier who controls the product being sold and determines the compensation for the sale.

·         Agencies are having difficulty creating non-insurance solution revenue streams.

·         We’re seeing industry shifts in buying behavior: consumer-centric at the individual level and single-source (benefits, HR, payroll) at the employer level.

·         There is little relevant differentiation between agencies (better service and a list of value-added services are not differentiators).

·         There is a lack of effective recruiting, interviewing, selection and training processes leading to too many poor hiring decisions.

·         The stereotype of the industry (not trusted and seen as delivering marginal value at best) is difficult to overcome.

·         Most agencies have little to no effective sales management.

·         There is a disproportionate dependency on the smaller groups most threatened by the above listed industry trends.

·         Compensation programs are misaligned with the behaviors needed to drive new revenue, often rewarding a “protect what I have” mentality over a “go get more” mentality.

·         There are too many silos within the typical agency – Sales vs. Service, Producer vs. Producer, Department vs. Department, Leadership vs. Everyone else, etc.

·         All too often, there is a lack of accountability to results, especially for producers. Agencies have to be willing to fire poor performers, including producers.

·         Agencies create a service culture instead of a sales culture with their compensation programs and their accountability structures (or lack thereof).

·         In all areas, the constant among the problems seems to be a lack of systems and processes.

The cost of doing nothing

We know we aren’t the only ones who recognize the existence of these challenges. Unfortunately, many agencies who see the direness of their circumstances are still not taking appropriate action. The reason for lack of action usually comes down to the difficulty of change but also the cost of addressing the problem in terms of both a financial and time investment. However, the cost of doing nothing and trying to stay the course would be the costliest decision of all.

Agencies who don’t change their course will watch their financials and their structure deteriorate before their eyes and are likely to be out of business in short order. The current path will lead to:

·         Little, if any, top line growth

·         Eroded profit margins at the bottom line

·         Disintermediation, either because of carrier selectivity, exchanges, technology, or new and unexpected competitors

·         Talented staff leaving and difficulty attracting new/replacement talent

·         Competitive acquisitions at distressed prices

There isn’t one solution for everyone, but everyone needs to find a solution

Being honest, there are self-interests in this group for issuing this letter. After all, our own success is dependent on this industry remaining strong and viable. However, we got into this side of the business because we like to help others succeed and success now includes a fierce belief that now is the time to fight for our survival. This is an industry worth saving and fighting for, but it is a fight in which we must all engage together.

If in reading through the list of challenges, you feel you are one of the vulnerable and exposed, we encourage you take control and start addressing your situation now.

There are basically two courses of action:

1.      tackle this problem on your own, or

2.      seek out help.

For most, and especially for those who haven’t yet started making changes, we believe the limited time frame to put answers in place makes tackling this on your own the wrong approach.

We suggest you align yourself with someone who can help you put the answers in place. Of course, as a group of consultants, we would love the opportunity to discuss with you how one of us might help. But we also freely admit there are plenty of other consultants and resources out there to whom you may turn, and we will even suggest some places for you to look.

Another option may be to align yourself with a peer group of agencies who are committed to fixing the same challenges and are working together towards common answers. We see successful agencies every day, agencies who are more optimistic about their future than ever before. Find one of these agencies as an example; there’s no need to reinvent the wheel.

The unacceptable response is to stick your head in the sand and pretend everything is going to be okay. Most of us don’t like the current course of the industry, so we need to be the ones who start steering the ship.

This is our defining moment; now is the time to take action.

The following are the consultants who met in Atlanta and who have committed to doing their small part in helping protect the independent agency system.

Agency Growth Mastermind Network – Nelson Griswold
The Anderson Agency Report | The Anderson Network – Steve Anderson Leading Authority on Insurance Agency Technology Productivity and Profits
The Brokers Broker – Kyle Hodges Helping brokers deliver unique wellness and marketing strategies for the 100+ market
Daymark Advisors – Jack Kwicien Trusted advisors to the insurance industry – Consulting, mergers & acquisitions, and charting the course for the future for brokers, carriers, and enabling technology firms
HR Technology Advisors – Joe Markland HR Technology Advisors is a leading provider of HR and Benefits Technologies for benefits brokers and their customers
iC3/The Intellectual Capital Coaching Corporation – Rick Bauman Helping Brokers succeed by building A Passionate Enterprise
Marsh, Berry & Company – Rob Lieblein Your Partner for Financial Consulting and Mergers & Acquisitions
Q4Intelligence (Formerly Benefits Growth Network) – Kevin Trokey & Wendy Keneipp An agency transformation network
The Wedge: Insurance Agency Sales & Management Training – Randy Schwantz Revolutionary Technology for Sales Team Development – Grow Your Agency Value, Grow Your Wealth

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Posted in Employee Benefits Distribution