Category Archives: Zenefits

Webinar Invite – Upping the Benefits Game – Introducing Ideas Most Brokers Aren’t Thinking About

I am conducting a webinar for benefits brokers that you may be interested in. This addresses many of the recent events in the benefits business and incorporates some of the content previously published on this blog. Between what Willis has done and Aetna there is a lot to discuss.

The webinars are on July 8, 13, and 21st from 12-1 est. to register click on this link to my website.

Here is some of the text from the invite.

How would brokers react if the entire small group benefits market went fee for service like Aetna is doing? What would the market look like if an individual health insurance plan became tax deductible? HR Technology Advisors would like to invite you to a webinar that will introduce what we think are strategic business decisions that brokers can make today that will position their firms for a much different benefits world. We can assure you these ideas are things most brokers are not close to thinking about that can give you a competitive advantage today while preparing your business for the future.

Feel free to call me if you have any questions at 508-530-5043.

Can Your Benefits Business Endure?

I spent the past few weeks traveling across the country meeting with different benefits brokers when I had a question asked of me that required some thought but produced what I think may be an interesting observation. The question was “What brokers are investing in changing their businesses the most to meet the changing demands of the benefits marketplace?” I speak to many brokers and work with many more and as I thought closely my answer came out as follows: “The brokers changing the most are those that plan on being around in 10 years. It is those that want to perpetuate their businesses independently rather than prepare their businesses for sale.” I could actually visualize the business owners of these firms that I was referring to as I was answering the question.

In my business I contract with brokers and one of the things I try to figure out is whether the broker I am speaking to is going to survive and thrive, sell, or fade away. I don’t know if one of the options is to exist as is in perpetuity. Can a broker survive but not thrive, sell, or fade away for a period of 5, 10, or 15 years? Will “as is” be an option?

The question also reminded me of a quote I saw in Peter Thiel’s book Zero to One that stated, “For a company to be valuable it must grow and endure”. The most important question you should be asking yourself is “will this business still be around a decade from now?” He is not asking whether the business will look different but will it even be around. Using this idea I thought about some of the questions one needs to ask oneself including:

  • Will health insurance still be purchased through an employer plan?
  • Will benefits brokers still be the main distribution source?
  • Will the carriers still be paying commissions? If so at what rate?
  • Will the current insurance companies still be around?
  • How will people (employees) be accessing their benefits information?
  • Will there still be claims analysis tools, underwriting, and where will wellness be?

–          What will health insurance plans look like? If they exist.

There are probably many other questions I could ask.

If you honestly answer these questions or at least make an educated guess then the future of the benefits world will be much different than it is today. If the industry is different how will your business be different?

What I am finding in the marketplace that the national firms are working hard to change. Obviously if they are publicly held companies then there are many people in the organization that want growth or at least compensated for growth. Other organizations that are changing include ones where the owner had brought in a son or daughter into the business. Organizations where the owner is less than 45 years old also see then need to be around 10 years from now. I don’t want to put everyone in the same box as we know there are exceptions to every rule but these are trends that I see.

The behavior of those that plan to be around is much different from those planning to sell or those wanting to hang on until retirement. Those planning to be around are investing in the future. They are making strategic decisions based on the long term and not just short term. They are building a culture that is not complacent but one that is dynamic where people can think different. They lead not follow.

Others have a plan of “Hope”. They hope the world doesn’t change. They hope that they can survive as is. They hope carriers don’t reduce commissions. They hope Zenefits goes away. They don’t invest in the future but actually reduce expenses to save money. They make minimal changes, usually following some other firm rather than think outside the box and plan for the long run.

So now I have written another article on change. I had one broker ask me what I would do if I were a broker. Good question. I don’t write these articles without taking my own advice. Or should I say take the advice of Peter Thiel. The answer to this question will be revealed in my upcoming webinar titled, “Upping the Benefits Game – Introducing Ideas Most Brokers Aren’t Thinking About”. Benefits brokers are welcome to attend this webinar by clicking on the following link to register.

I guess I will finish with a quote from Henry David Thoreau who said, “Never look back unless you are planning to go that way.” I think it is safe to say that the future of the benefits business will look nothing like the past. So ask yourself, can your benefits business endure? Will it be around in 10 years? If so what will it look like? It is time to ask and answer those questions. Then take action.

Be Careful – Your Benefits Goggles May be Blurring Your Vision

There comes a time in many industries where things begin to change. Some people welcome change and others fight it. Regardless, change is often inevitable and the market forces of change are too powerful to prevent it. I think the employee benefits industry is going through some big changes right now. This article is not really about what those changes are though I can throw out some words like Private Exchanges, Zenefits, ACA, Consumer Driven Healthcare, HSA’s, ACO’s, that are all terms that are more common today than just a few years ago. What this article is about is the ability to recognize change and then take action to meet the challenges that those changes may present. Or should I say to capitalize on the market opportunities that the changes present.

In any industry it is important to recognize change. When you look at firms like Kodak and Blockbuster Video you see two firms that missed the market change. Try to think of the biggest selling cell phones before the iPhone or Samsung. Remember the Motorola Razr? How about the health insurance business? When I entered the benefits business in 1986 UNUM was in the health insurance business. So were Travelers, Prudential, Metropolitan, and Guardian. I do recall delivering my first renewal with an employee rate of over $100. What will the benefits business look like 10 years from today? For the most part the brokerage side of the benefits business has not changed that much over the past 3 decades. However, over the past 5 years the fastest organically growing benefits brokerage firms have been a payroll company and now a technology company. Times are changing.

Recently I have been conducting many webinars for benefits brokers about some of these market changes. While I am not going to proclaim that I am the soothsayer with a clear vision of the future, I do like to try and point out some of the factual changes and provide some interpretation of what these changes may mean for the industry. Zenefits raising $500 million does have industry implications. And how about the number of hospitals entering the insurance business? What are the future implications there? What I find most interesting is the broker audience reaction to some of these webinars. Some brokers don’t want to acknowledge that changes are coming while others simply misinterpret what the actual changes are. Those that don’t see the change most likely don’t want to see it, while others are simply viewing the world from a narrow perspective. I like to say they that their “benefits goggles may be blurring their vision”.

There are many examples of different perspectives. Is Zenefits a technology company or a benefits broker? They call themselves a technology company. Others call them a broker. I refer to them as an outsourcing firm. At lunch today I had the President of a major HR Technology company tell me he believes stand-alone benefits enrollment systems will not exist in the future while earlier this morning a broker was telling me he just invested in a benefits enrollment platform. I had one broker tell me the future will all be individual health insurance. Other brokers are entirely dependent on an existing employer-based insurance model. An employer recently told me he would never allow his broker to offer voluntary products to his employees because he thought they were too expensive. At the same time voluntary product vendors are saying the way to make up for decreasing medical commission is by selling more voluntary products.

The changes you may need to make to compete effectively in a future benefits world may be dependent on some prediction as to where you think the market is going. I know brokers today are struggling to decide whether they want to make a play to compete with Zenefits. The moves you make may be very dependent on what you think their value proposition is. If they are a technology company then you may need to do one thing. If they are really an outsourcing firm you may need to do something else. Whatever it is you choose to do my advice is to take your benefits goggles off. They may be blurring your vision. Because if your vision is off you could choose the wrong path for your business which could have negative implications in the future. And if you want to buy a benefits enrollment technology company just give me a call. I know several that are for sale.

Webinar Announcement – Zenefits Raises $500 Million – What does this mean for benefits brokers?

I write on this blog periodically about Zenefits. Just this week Zenefits announced that they have raised $500 million in additional venture capital. ( read more here ) In my opinion the rules of the benefits game have now changed. $500 million is a lot of money. If you have not heard of or competed with Zenefits they will show up fast, real fast, in your market. It is NOW time to take action – not a month from now or 2 months from now. By then most brokers will lose a case or two to Zenefits. According to Zenefits,  “The new round of funding will enable Zenefits to build up its sales and marketing teams to help the company reach the approximately 5 million American businesses with between 2 and 1,000 employees and to scale its account staff so that it can support these new customers.” And yes, they are going up market.

I am conducting a webinar on this topic over the next few weeks. Any benefits broker that wants to attend this webinar can register by going to my website at Go to the webinars section.

While I have done other webinars on this topic this webinar will be different. It will get more into where the market is going versus where it is. I think those who attend will find the time well spent. Click on the link to register. Thanks.

What Zenefits Tells Us about the Benefits Market

Maybe I should stop writing about Zenefits but Zenefits is not going to go away. Last weekend I was at a youth basketball game and I ran into a broker I knew who told me their firm lost a 110 person client to Zenefits. This was a Massachusetts broker. This weekend I got an email from a broker in Pennsylvania who needs help because they just lost a 75 person firm to Zenefits. I am sure with Zeneifts generating in excess of a million dollars in commissions a month these stories are a frequent event. While many brokers may think Zenefits is a fad I think Zenefits says a lot about the benefits business that few brokers are recognizing. If you want to learn a little about the Zenefits model you can read my other blog titled, “If You Want to Be like Zenefits You have to mow the Lawn”.

I speak at many broker conferences and I often ask brokers how they are different. The most common answer I get is that they provide great service and have strong relationships. It is in this environment that Zenefits comes in and displaces more broker’s business faster than any company has ever done. And they do this with a different value proposition, extensive marketing, and no local service. So while most brokers think their service is a differentiator and of great value there are a large number of employers that don’t put the same value on the service. I think these employers are buying into Zenefits for one of two reasons:

  1. They think they have some new and great technology.
  2. They are looking for help administering their HR and Benefits and they see Zenefits as a firm that is offering this help.

Based on my experience the Zenefits technology and service offering on average has a street value of around $5-$10 per employee per month. This cost would vary based on the client size. They are displacing brokers that receive commissions of $20-$40 per employee per month for providing brokerage services. What this tells us is that the employer market values the Zenefits $5-$10 offering more than the brokers $20-$40 PEPM services. They may not know the street value of what Zenefits is delivering or know what their broker is getting compensated but is doesn’t matter. One is being sold against the other.

Many brokers have acknowledged that they believe they are highly compensated. For that reason they have been adding free “value-added” services to employers so that they can “give back” something. These value added services have ranged from benefits enrollment systems and HR call centers to wellness programs. The major difference between the average broker’s value-added services and what Zenefits is delivering is that Zenefits appears to be offering something that is in greater demand.

As a consultant in the HR and Benefits technology space I believe this demand will stay strong until the majority of employers have automated their HR and Benefits. This will be for years to come. So while many brokers can hope that Zenefits will go away I believe the demand for what they are delivering will grow. And there will be others. The Zenefits model tells us the benefits market is changing. What employers have valued in the past may be of less value in the future.

Why the Utah Department of Insurance is Wrong About Zenefits

Some of you may have seen that the Utah Department of Insurance has issued a letter demanding that the new California based benefits broker/technology Company named Zenefits cease conducting their business as is or they will face major fines and need to return their commissions earned in Utah. Zenefits is providing a free HR/Benefits system in exchange for naming them the benefits broker. Zenefits claims they give their system away to any firm and don’t require the benefits business, but let’s stop pretending, we all know that nothing is free. To the best of my knowledge 100% of their revenue is from receiving commissions as a benefits broker. The State of Utah says that Zenefits is engaging in rebating through this practice. I believe the State of Utah is wrong but also believe the other interested parties are somewhat disingenuous with their arguments including those supporting Zenefits and those supporting the State.

Let’s start with the rebating issue. I am not going to get too technical with the legal ease. The Utah Insurance laws allow the free distribution of a benefits enrollment system but not a HR System. Their language is as follows:

According to R594-154-11. Electronic Platform and Application Systems – Producers or agencies may provide electronic platforms that provide directly related services of the insurance products to the employees. Fair market value must be charged for items such as human resources and legal services whether electronic or paper.

The State is saying Zenefits is giving away a HR system. They also add some other things to their letter to Zenefits such as it is illegal to require an upload of data before the purchase of benefits and the way Zenefits advertises is illegal, but it is all related to the HR system. Zenefits can be back in business and avoid fines if they charge fair market value for the system. The main issue is the free HR system. In my opinion all other claims are secondary.

Here is why the State of Utah is wrong. Benefits enrollment systems, HR systems, and Payroll systems are becoming one system. At my company, HR Technology Advisors, we recently conducted a national survey that found that over 80% of the employer market is looking for a single technology platform that manages HR and Benefits and sometimes Payroll in a single system. Zenefits and almost all the leading HR and Payroll vendors including ADP, Paychex, Ultimate Software, Workday, Oracle, and many more are responding to this market demand by delivering these more robust platforms. When they sell their systems many don’t draw the lines between HR and Benefits the way the State of Utah has. They are different parts of the same body. If I buy the system I get the HR and benefits parts whether I use them or not. One of the leading systems I know charges $5 PEPM for their system. Without the HR it is $5. With the HR it is $5. The Utah Insurance laws treat these systems like they are different systems when they are not. The vendors don’t make a distinction. In fact some brokers give away Private Exchange technology that cost $6 PEPM when some HR systems with benefits enrollment systems costs $5 or less. This is why the State of Utah is wrong. They are assuming these systems come in pieces and that a fair market value for the HR part can be pieced out. The world has changed and the Utah State laws have not.

Think of this for a minute. If the market is moving to single systems for HR and benefits then many of the benefit system provider will need to add HR functionality to compete with Zenefits and others. What happens if you are a broker providing a free benefits enrollment system within Utah law and the vendor adds some HR functions in their next product release? They do this with an update on a weekend overnight. Do you have to send a bill to all your Utah customers for the fair market value? What if the vendor does not charge for this new feature? Is there a fair market value? Also, how many brokers give away HR Libraries, HR Call Centers or Compliance Alerts, that aren’t just benefits? I looked at the websites of other benefits firms in Utah and they promote other HR type systems. Zenefits is definitely more open about what they are giving away but I guarantee they aren’t the only benefits firm that may in some way be breaking the Utah rebating laws as currently defined.

Here is another reason why the State of Utah is wrong. Rebating laws would imply that the buyers are making their purchase decision based on the free offering. I don’t think the Zenefits buyers are choosing Zenefits because of a free $5 PEPM HR system. They aren’t attracted to the incentive/rebate as the State implies. They are buying Zenefits because Zenefits is promising to make their HR/Benefits lives easier. You don’t get 2000 new clients in two years because of a free $5 PEPM system. You get 2000 new clients because you are solving a big problem. If in fact Zenefits is getting the business because of a free $5 PEPM system then that doesn’t say much for the value of a benefits broker. It would imply the benefits broker is highly over-compensated which should then be a bigger issue for the State Insurance Department.

Let’s also not pretend what Zenefits is and isn’t. I saw one article with the title, “Utah Gov. Herbert: Don’t Shut Down Zenefits; Stand Up for Innovation and Online Competition”. To me Zenefits is neither real innovation nor online competition. For the most part they are a benefits broker using a large marketing budget to do what others are already doing. Their technology is not unique as there are many vendors that do the same thing. In fairness to Zenefits they aren’t claiming to have invented something new. They are saying that they are helping employers with a problem by leveraging technology. Any broker can do this in 48 hours if they wanted to. In my opinion what Zenefits really is is a disruptive business model. Is Uber a great technology or a disruptive business model? How about Orbitz and Amazon? Many brokers have a business model similar to Zenefits. What most brokers don’t have is the $66 million to market this model across the country and disrupt the market as Zenefits is doing.

So the State of Utah should understand that benefits enrollment systems and HR systems are one system. They are two arms on the same body and can’t be disconnected. They need to get with the times. Benefits brokers also need to adapt and stop filing complaints against Zenefits with the State Insurance Bureaus. Many are delivering HR things for free already and they can deliver a Zenefits-like model but it takes work. And Zenefits should almost stop pretending they aren’t a benefits broker. Sure they have a nice technology and they have a lot of money to disrupt the benefits distribution channel. But they are what they are. They are knowingly giving away technology in exchange for benefits commission. That’s OK because they are helping employers by solving problems. All parties are somewhat twisting the story but in my opinion this is just noise created when change happens.

One final thought. If benefits commission is so lucrative that it can fund the development of HR software that many companies often spend tens of millions of dollars to build, then don’t expect the rest of the world sit on the sidelines. Paychex is already a broker. Will other firms that compete with the Zenefits technology jump into the benefits brokerage business? How does a HR technology vendor compete with free? They have to access the revenue source that funds free. The world will change. Let the games begin.

If You Want Results Like Zenefits You Need to Mow the Lawn

Some of you have heard about this new company from California that is disrupting the benefits brokerage market not just in California but across the U.S. I have heard from brokers in many states that lost business to this company named Zenefits. These brokers claim to have had good relationships with their clients yet those clients left them to move their business to Zenefits, who in many cases the employer most likely never met. According to some accounts Zenefits has added around 2000 employer clients with close to 50,000 employees in 2 years. Now these numbers may be exaggerated, I don’t know, but imagine if they were just half that. What broker in America has added 1000 new clients in 2 years?

So what is it that Zenefits is doing that would motivate an employer to fire their current broker and hire Zenefits? Many benefits brokers conclude by looking at their website that it is because they are giving away free Payroll with some HR and Benefits technology. While this may sound plausible I don’t think that is the case. One does not get 2000 new clients in two years because they give something away for free that could cost $5-$10 per employee per month. If “free” is the reason then that says even more about what these employers think about the value of a broker as a benefits advisor. I would contend that the reason that Zenefits is getting so many new clients is because they are delivering a value proposition that solves a big problem for employers that few other brokers are delivering.

This is where I get to the “mowing the lawn” stuff I referenced in the title. The Zenefits value proposition is clearly stated in an interview that the president conducted on Bloomberg News. In response to a question where the interviewer asked how his technology was different he answered as follows” “We handle everything else – employment agreements, compliance, getting them on payroll, getting them on benefits, all that stuff from soup to nuts. That’s the way I would have wanted it to work so that’s the way we built it.” Most of the brokers I speak to believe Zenefits are getting business because they give away some free technology. As you hear in the presidents response he is clearly stating that they provide services. Brokers think they are giving away lawn tractors when what they are really doing is mowing the lawn. I have had many brokers ask me if there is technology to compete with Zenefits. If you were to hire someone to mow your lawn do you ask to see their lawn tractor? Most brokers are missing the point.

As a business owner myself with 20 employees I can relate to the value proposition that Zenefits provides. I don’t have a HR person on staff and I wish someone would come in and offer to take care of all my HR, Benefits, and Payroll issues. I have a job to do; I don’t want to worry about these things. The other day an employee came into my office and asked about our 401k. My answer was “I don’t know.” As a small business owner I want someone else to worry about answering employee questions. I know what I want. I want “worry free”. If a company like Zenefits called me and said they would take care of all HR, Benefits, and Payroll and make me worry free I would say sign me up. I did have a company call me one day that did offer all this. That company was Paychex, not a traditional benefits broker.

So if you are a broker and want to generate new business like Zenefits you need to change your business and offer similar services. And remember, the employers attracted to their value propositions aren’t looking for lawn tractors. They are looking for someone to mow their lawn.