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Aetna buys bswift: Why benefit brokers must pay attention


More news from the technology front: Aetna acquires bswift. Last year, it was Towers Watson buying Liazon, now Aetna and bswift, and next year it will be someone else. Under the radar a little bit was the Oct. 16 Hodges-Mace announcement of their SmartBen acquisition. It doesn’t carry the cache of Aetna or Towers Watson, but it was still a market move. Is this just beginning of the dance where everyone needs to choose a partner? And what does this mean for the benefits market and the benefits broker?

For some, this acquisition may be strange. Aetna buys a company that provides technology used by their competitors. The bswift enrollment platform handles enrollment for many employers that don’t have Aetna insurance. Towers Watson bought a company distributed by their competitors, other brokers. What most people aren’t realizing is that the world has changed. In many industries companies that compete in one market segment may be partners in another. If you view this acquisition in the old world where competitors don’t work together you may see it one way, but in a new world it may look a little different.

My message to brokers on this is to start thinking differently. Those who don’t will get left behind. The rules of the game are changing and you don’t get to make all the rules.

I have been fortunate to have worked in some capacity with Mark Bertolini, CEO of Aetna, and Rich Gallun, CEO of bswift. Both are outside-the-box thinkers. Aetna has invested billions in technology preparing for what they view as a consumer-centric health care model. They want to reinvent the patient experience. To quote Bertolini, “We’re going to begin to change the health care industry by giving people tools they can put in the palm of their hand.”

Here is another quote from Bertolini that would make brokers pause. When asked about the future of health care, Bertolini responded: “There wouldn’t be plan designs. You wouldn’t need them. What you would do is invest in all those things that are necessary to keep people healthy.” You can see a full overview of the Aetna model by viewing this presentation from their 2013 Investor Conference.

More than a business move

Some may think this is an acquisition of a benefits enrollment platform by Aetna. But I see this as another step by Aetna to execute on a plan to compete effectively in a new health care world. A world where consumers are in more control. Where provider systems are engaged in a patients wellness and not just proving treatment after the fact. A world where health information and communication is moved via Web and mobile.

In this case, bswift made a strategic move into the consumer centric world through their private exchange technology with individual rating and decision support tools. Now it has paid off. This made them attractive to Aetna. Congratulations to bswift for a job well done.

So what does this mean for benefits brokers? A few weeks ago I wrote an article titled “Does Apple’s HealthKit signal the end of employer-based insurance?” Some may not relate Apple’s investment to the Aetna acquisition of bswift; however, I think they are related.

Apple is clearly one of the top consumer technology vendors in the market. Aetna is driving consumer centric health care. They are pieces of the same puzzle. It is a puzzle benefits brokers need to pay attention to because the market is changing around them. A carrier buying an enrollment vendor says one thing, Aetna’s and Apple’s investments mean something different. In a not-so-obvious way the health care world is changing in a way that most brokers are not recognizing. Consumer-centric; mobile; doctors as wellness facilitators; employers out of the risk business? Maybe. So get ready.

Here is What a Private Exchange Is and Isn’t


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.

For the Record – The HR Technology Advisors Position with ADP


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.

It’s Time to Simplify Benefits


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.

 

For the Record – My Position on HR and Benefits Technology Vendors


I am frequently asked what I think of certain HR and Benefits technology solutions. And while I would certainly have my preferences if I were buying a solution for myself or my own company I do believe one size does not fit all and different people or companies have different needs. Therefore my response is always the same and that is the market determines if a company sells something of value. If a company is in business and making money than they are providing some value to the market so therefore someone must like their product or service.

When it comes to Benefits and HR technology products I like to think about it like anything else. When buying a car there is certainly a difference between a Ford Taurus and a Mercedes. When someone says a Mercedes is a better car there is no argument. If the discussion were about which car brings a better value that is a different discussion. We also could agree that the best product does not always sell the most. McDonalds sells more hamburgers than any other restaurant yet I am sure more would agree that they don’t have the best hamburger. But how can one compare a $1.00 hamburger to a $7.99 hamburger? I am sure you get my point.

I have many technology companies tell me they have the best product in the market. If you are one of those company representatives don’t take offense when I respond that everyone does not buy the best, need the best, can afford the best, or that best is relative and subjective. In fact the best may often be the highest price and therefore may only expect to get the top 5% or 10% of the market.

As a HR and Benefits Technology consultant for benefit brokers and their customers it is my job to match products with client needs. It is my job to understand who is looking for the Mercedes versus the Ford Taurus. Which one is priced like a McDonald’s hamburger versus a Five Guys burger? So for the record, I believe there are many solutions in the market that will fit various client needs. The competition is also forcing vendors to continually improve their products and with a large market of employers there are solutions to fit all shapes and sizes.

You Can’t Win or Stop a Technology War


When I got into the Benefits Technology business in 1997 I was given some great advice from one of our company programmers and that was, “You Can’t Win or Stop a Technology War.” I found this quote to be so true that I share it with some benefits broker, technology vendor, or employer almost daily.

When it comes to technology, whether it is an automobile, a cell phone, a camera, or a benefits enrollment system, there are those that wish technology advancements would stop and others who think they are going to win. There are certainly many examples of each. Think about companies like Kodak, Polaroid, and Blockbuster, and how they may wish the world hadn’t changed. Then there are those who are trying to “win’ the war. Very few companies have the capital to compete in that world. Certainly companies like Amazon, Apple, Facebook, and Google may come to mind as companies that are winning, at least for the moment. However, these companies, like Microsoft, will have many companies shooting at them and each will spend a great deal of capital trying to maintain their lead position.

So let’s talk about the benefits business. Benefits brokers are always asking me who is the “best benefits enrollment vendor” or what do you think if this vendor or that vendor. My response is always the same. First off, best is relative. Second whoever may be “best” today may not be best 3 or 6 months from now when another vendor comes out with something better.

The vendors also participate in this game. Recently I did market research for a client looking for a benefits enrollment system. During the process I would bet I had 4-5 vendors make the claim that they were the best. None of them could quantify why but at least that is what they thought. I then asked them how much money they had in the bank to compete in this space. Few would give me the answer though the question is very relevant if “Winning the Game” was a competitive objective.

The benefits enrollment technology game is changing rapidly. Prior to 2006 ADP, Paychex, and Microsoft were not in the benefits enrollment business. Today they are and they have cash. Even Salesforce.com has now entered the HR Technology business. How long do you think it will be before they have a benefits enrollment system?

For those brokers looking to find the best benefits enrollment vendor my advice is stop. Whoever you may choose will not be the best 6 or 12 months from now because someone will have come up with something better. The best thing to do is focus on the problem. If a client wants a benefits enrollment system there are many vendors that have solutions that will work.

You Can’t Win or Stop a Technology War


When I got into the Benefits Technology business in 1997 I was given some great advice from one of our company programmers and that was, “You Can’t Win or Stop a Technology War.” I found this quote to be so true that I share it with some benefits broker, technology vendor, or employer almost daily.

When it comes to technology, whether it is an automobile, a cell phone, a camera, or a benefits enrollment system, there are those that wish technology advancements would stop and others who think they are going to win. There are certainly many examples of each. Think about companies like Kodak, Polaroid, and Blockbuster, and how they may wish the world hadn’t changed. Then there are those who are trying to “win’ the war. Very few companies have the capital to compete in that world. Certainly companies like Amazon, Apple, Facebook, and Google may come to mind as companies that are winning, at least for the moment. However, these companies, like Microsoft, will have many companies shooting at them and each will spend a great deal of capital trying to maintain their lead position.

So let’s talk about the benefits business. Benefits brokers are always asking me who is the “best benefits enrollment vendor” or what do you think if this vendor or that vendor. My response is always the same. First off, best is relative. Second whoever may be “best” today may not be best 3 or 6 months from now when another vendor comes out with something better.

The vendors also participate in this game. Recently I did market research for a client looking for a benefits enrollment system. During the process I would bet I had 4-5 vendors make the claim that they were the best. None of them could quantify why but at least that is what they thought. I then asked them how much money they had in the bank to compete in this space. Few would give me the answer though the question is very relevant if “Winning the Game” was a competitive objective.

The benefits enrollment technology game is changing rapidly. Prior to 2006 ADP, Paychex, and Microsoft were not in the benefits enrollment business. Today they are and they have cash. Even Salesforce.com has now entered the HR Technology business. How long do you think it will be before they have a benefits enrollment system?

For those brokers looking to find the best benefits enrollment vendor my advice is stop. Whoever you may choose will not be the best 6 or 12 months from now because someone will have come up with something better. The best thing to do is focus on the problem. If a client wants a benefits enrollment system there are many vendors that have solutions that will work.