Tag Archives: Benefits Enrollment Systems

Sun Life Buys Maxwell Health – So What?

Today it was announced that Sun Life acquired Maxwell Health. The first thing I asked was why? I don’t see the benefit to an employer or their employees. I see no benefit to the broker distributors. In fact, I hardly see a benefit to Sun Life. I can see the benefits to Maxwell if they either needed cash or their investors wanted out. I don’t really need to speculate around that here, but I am sure someone will tell me I am wrong. Someone please tell me why this is a good or even “relevant to the market” transaction. I will print it if the reason is sound.

If I am an employer, why would I want a technology solution coming from a single vendor? Technology to manage benefits, HR, and payroll should be owned by the employer, with no attachments. It should be something you invest in to make better every day. It should be engaging and provide employees with all the relevant company information that they need. In a survey I had done, the number one thing employees wanted to see via web or mobile in an employer sponsored HR system was how many vacation days they have left. Most employee benefits technology systems don’t track time off and those that do are bad at it.

As a broker, one would think you would want to represent the employer’s interests. You would want to have more options than representing a single vendor. And why would I need a carrier to bring me a technology solution as I could easily pick up the phone and find ten systems in one hour? Providing choice in health insurance, disability, and other benefits is an asset and the core to being an insurance broker versus an agent for a single company.
Other carriers are already out there providing a broad range of technology solutions. Many are providing discounts. This move by Sun Life could create a competitive advantage, to everyone other than Sun. In my business I could bring a dozen benefits enrollment systems, HR, and payroll to any employer, all with carrier subsidies available from many carriers. I have choice for technology. Choice of carriers. And subsidies for the employer if needed. It is easy to do, and I would add not a real differentiator.

Now if Maxwell develops something real special then maybe there could be something there. However, as I have learned from being in the technology business for years, technology is easily replicated. As the saying goes, “You can’t win or stop a technology war”. So, Sun Life better have a real lot of money to continue to fight the battles of this very active HR/Benefits/Payroll technology war that is going on. I would expect investments of over $100 million per year in their technology would be required simply to compete.

So, my assessment of this transaction is, So What? It is just more noise in a very noisy market that in my opinion doesn’t change the world a bit. (Other than for some employees or investors in Maxwell.)

The battle for power in health care has begun – Are the brokers powerless?

In this highly energetic election year health care is still one of the major battle grounds dividing the candidates and the political parties. Rubio wants to let employers give money to employees tax-free and let them buy from a broad market. Cruz said he would make an individually purchased health insurance plan tax deductible. Sanders is a proponent of a single-payer system and Hillary wants to bring the insurance and pharmaceutical companies to their knees. As for Trump, I am really not sure what his plan is. What I do know is that there are many people with all kinds of plans and they aren’t asking me what I think.

As someone who is somewhat in the health care industry along with my broker partners the industry around us can change dramatically, yet we have little power to impact change. Are we powerless? Being powerless is a very uncomfortable position especially when the outcome can significantly impact one’s business.

The cost of health care and thus health insurance is a burden on our economy, a burden on employers, and with the cost shifting to employees and higher deductibles it is becoming an ever growing burden on employees. This is somewhat a new dynamic that employers have to deal with too. It is an industry with many interested parties looking for solutions. Those that deliver solutions that can bend the health care cost curve could reap big rewards.

So who has the power to fix this? Insurance companies? Hospital systems? Doctors? Google or Apple or other outsiders with a lot of money? Government? Employers? Employees? Independent consumers? Brokers? Many are trying to solve this problem, some because they honestly care to, and others so that they have a viable future. And for those that think some are “too big to fail” or at least quit, remember this list of companies that used to sell health insurance but chose to leave the business. (Prudential, UNUM, Travelers, Guardian, Metropolitan, Great West, State Mutual) I am sure I missed many others. I don’t imagine these firms that have left the business or the ones fighting to win today care(d) about my interests or the interests of benefits brokers.

The health care system will undergo significant changes in the next 5 years. My business is dependent on the health insurance business because I do business with brokers so how the industry changes is pretty important to me. If the business did not change, then that would work for my business. If I could dictate how the industry evolves then that would be fine too. But without the power to stop the business from changing or dictating its future then those of us on the fringes of the business will need pursue another strategy.

So what are brokers to do? You can fight the change as many of the cab companies are doing to stop the advances of Uber. You can develop the solution and therefore ensure the outcome. However, I doubt that any broker is in the positon to change the health care system or have the capital to do so. You can hope it doesn’t change. You can wait until it changes and then react fast. You can quit as the insurance companies did in the 80’s and 90’s. You can also accept that the world is going to change and that you can’t impact its outcome. If that is the case then you need to exercise the power that you do have, anticipate the future, and bring some value to the market that fits in the new model.

While companies like Aetna, UHC, Google, Apple, and many provider systems are changing or investing in businesses to control health care costs, I think firms like Fidelity, Towers Watson/Willis and other large benefits firms have made significant investments to provide a valuable service to support where the industry is going. Just ask why did Fidelity choose to get into the benefits business now? Why did Towers Watson buy Liazon and then merge with Willis?

We are in an industry where we don’t get to make the rules. We are powerless and have to play by the rules imposed upon us. An insurance company can eliminate commissions with an e-mail as many have done in the individual market. The government can pass a law making individual insurance tax deductible. Carriers leave markets and hospital systems are entering the insurance business. The future is imposed on us.

Don’t think we are the only ones. Those who own Ford dealerships are dependent on Ford to make great cars. A friend of mine has a manufacturers rep business and sells power supplies. One year a manufacturer that represented 60% of his revenue decided to no longer use third-parties to sell their products and sell direct. His business was devastated though he did recover. His problem was that he did not build a business that would have protected him from this risk. Had he planned ahead it may have been different. It is for that reason many car dealers often own multiple dealers representing multiple manufacturers.

In this blog I have written articles on where I think the business is going. (The New Benefits World is Here – Though You May Not Have Seen It I am already making moves anticipating a different future. My experience with benefits brokers is that few have been looking into the future to try and predict where the market is going. Most are hoping the world doesn’t change. Others are waiting until it changes and other are simply selling. I am optimistic. I think there are opportunities for those that anticipate change and provide some value for this future market. In fact, there will be less competition because many will have waited too long to change and others simply won’t have the skills, scale, or vision to bring real value to a new benefits world.

I think a new benefits world will put power in the hands of the consumer. Think about this for a minute, if employers had the power what would they want? If employees had the power what would they want? As an employer, today’s system gives me little power. As an employee I have less. When someone delivers what I want I will say it is about time.

So what advice do I give? If I were a benefits broker, I would start studying where the market is going to go. I would ask employers and employees what they would want. I would gain an understanding of this market like no other. I would engage the companies who are working to create this new benefits world. I would make an educated guess as to where the market is going and when it will get there. Then I would look for the opportunities to provide the value. I would also start now. I have.

PS – I just got my company health insurance renewal today and costs are +16%. This craziness has to end and I feel powerless. Please help!

My Bold Predictions About the Future of the Benefits Business – A Summary

In various articles in this blog, and in some of the webinars I have conducted, I have made some bold predictions about the future of the benefits technology business (as technology is my main area of expertise) and more broadly about the benefits business in general. I guess I am as qualified as anyone in this area having started in the business 30 years ago. As I have stated repeatedly, the reason I make these predictions is because for my business to survive and thrive I too need to predict, to some degree, the future so that I can make the right strategic decisions today in preparation for the years to come. The reason I am publishing these (again) is because I am looking for others in the benefits business to participate in my “think-tank” to talk about these issues and collectively formulate ideas that may be used to help our businesses thrive in the future. So this is somewhat my “call-to-arms” for anyone in the benefits business. Here is a summary of my predictions. I may be right and I may be wrong.

1. HRIS/Benefits Technologies without Payroll will become obsolete.

This is a prediction I made a few years ago and I am holding to it. As a technology consultant we help employers choose and implement HR / Benefits / Payroll technology solutions. The only demand I have for benefits only systems comes through benefits brokers. Outside of the benefits broker world I find few employers wanting stand alone Benefits or HR/Benefits systems. Yet those are the systems most brokers promote. Personally, I can think of few business reasons to have multiple systems. My company runs one system and all my employees have everything related to work through one app on their cell phone. And those that think integrating systems will work let me give you the names of a hundred employers who will debate you on that. The majority of technology issues that employers bring to me are caused by having multiple systems. Everything needs to be in one system with one database. Integration causes problems. I replace benefits enrollment systems that brokers put in for employers every day. The broker often causes the problem and now the employer wants to get rid of it. Here is my article on this prediction and the mistakes brokers are making.

2. The majority of employers with fewer than 100 employees will look for a single-source technology and services solution in the future.

Zenefits has exposed a pent-up demand in the market and that is to have some outside firm make an employer’s HR life easier. Small employers want to throw things over the wall and simply have someone else handle large parts of HR. The PEO’s, HR consulting firms, and many payroll firms already know this. Zenefits did not invent anything new here. I also believe Zenefits is really an outsourcing firm, not a technology vendor, but we can debate that somewhere else. My main point is that this demand will grow as more and more vendors enter the market. What does this mean for brokers? Brokers who do not provide such services will be replaced.

3. There will be dozens of Zenefits-like companies in the market within 6 months.

This HR/Benefits/Payroll technology and services market is no secret. The fact that employers will change brokers to move to a solution that combines HR/Benefits/Payroll technology with benefits services is also not a secret. There is a ton of money being invested into this space and vendors will be popping up everywhere. New technology vendors will arrive and get into the benefits business, but more competition will come from existing businesses offering some product or service in this market already. This will include payroll companies getting into the benefits business as brokers and HR Consultants expanding into the benefits and payroll business. I spoke to a payroll company owner this week that is getting into the benefits business. Why? Because that is where the money is. And everyone knows it. They also won’t partner with brokers. At least not the ones doing this right. Competitive pressures will require anyone in this space to leverage the benefits commission to compete. Even if the commissions is half of what it is today.

4. Small group health insurance commissions will be 50% of what they are today by 2017.

Do you know that small group commissions in Massachusetts are almost half of what they are in California? Yet, there is no shortage of brokers in MA. The carriers know this and they are getting squeezed by ObamaCare. Firms like Aetna are already cutting commissions and others will follow. One is because they can, but the other reason is because they will have to find every dime to compete. The small group market may even go to 100% fee for service. Here is an article about this here.

5. Employers will be out of the health risk business within 3-5 years.

This prediction, along with the next two, are somewhat related. I covered this in an article I wrote titled, “The Coming End to the Health Insurance Business as We Know It.”  The key term in this prediction is the “health risk” business. When I spoke at a conference on Private Exchanges I asked the employers in the audience why they would be interested in a Private Exchange. The answer was not what most brokers would think. One may think that employers want to give employees more options. Others will say they want to reduce health care costs. The answer I got was they thought that a Private Exchange would get them out of the health care business. Employers don’t want the hassle of worrying about high claimants, wellness programs, disease management, and that annual dreadful renewal meeting. They want out. That doesn’t mean they mind giving employees money to pay for part of their health care. They just want out of the risk business. And I think the market will comply. What does this mean for brokers? No more underwriting. No more claims analysis tools. No more catastrophic claims management tools. Employer based wellness to try and control health care costs will go away. For most brokers these are their core skill sets. These skills won’t be needed. Wow! This changes the world of most national benefits firms or any firm that focuses just on large group.

6. Most health insurance will be individually purchased within 3-5 years.

Think about this for a second. There is no law that would prohibit a traditional insurance company from offering all their small group pooled products to larger employers. Can an Aetna offer all the same products in the public exchanges to an  employer at the same rates as on the public exchanges? I don’t believe there is a law that says they couldn’t. It could still be a group plan but just be pool rated and with more options. Employees who leave an employer can move to a public exchange into the same plan. I think carriers may do this because the market wants it. This will get employers “out of the risk business” as I indicated in my previous prediction.

7. Provider systems will dominate the health insurance market in 5-10 years.

The largest hospital system in Massachusetts got into the health insurance business a few years ago. According to my neighbor, who was a consultant for them, said the reason they did this is because with ObamaCare the providers are getting less and less money from government programs that are adding more and more people. In order to survive the hospital system needs money from the healthy people not just less and less money from the sick people. As my neighbor said, there will be no Blue Cross version of them in 5 years. Keep these comments in mind when you read about the recent Obama/Boehner deal to lift the debt ceiling. In that deal Medicare reimbursements are getting cut 2.5%. So 5-10 years from now employees will be choosing between provider systems not health insurance companies. The providers and insurers will be one in the same.


Many who may read this blog or who have listened to my webinars may think I am nuts or at least way off base with some of these predictions. Many will hope I am wrong. What has really amazed me most is how slow people are to change. I wrote about the coming of a Zenefits in 2009 yet few acted. I have seen brokers lose well over a hundred thousand dollars in commission yet still not act. Or worse, they take action but it is the cheap and often wrong solution creating a false sense of security. Now I am predicting a much different future that requires further and even more profound action. I am not willing to risk my business on hope so I am taking action in my business. What am I doing? Well, stay tuned, but I am not going to tell all my secrets. Or give me a call to possibly join my think-tank. Either way, take action.

False Perception of Private Exchanges Causing Problems for Brokers

Private Exchanges are still in the news with firms like Time and Walgreens  moving some employees or retirees to Private Exchanges. Some polls still claim that Private Exchanges will dominate the market in a few years. Yet I would contend that most people still don’t know what a Private Exchange is. I have written my perspective on this in previous articles on this blog. Regardless of what one would define as a Private Exchange what really matters is what employers think it is. While brokers may not believe Private Exchanges may take hold or they do need to compete with the idea or a Private Exchange and more important the employers’ perception of what a Private Exchange is./

I have given speeches about Private Exchanges at many employer conferences. One of the first slides I show is a study that claims that 70% of employers would be interested in a Private Exchange. Yet when I ask the audience what they think a Private Exchange is few know. What is more interesting is that when I sat with a group of employers they spoke about what they hoped it was. The most common answer was that they thought a Private Exchange would get them out of the health insurance risk business. Those employers with over 100 employees that are experience rated simply wanted out. They were hoping this is what a Private Exchange was. Some were disappointed when they found out that Private Exchanges did not deliver this.

These employers are more than willing to give employees money for health insurance. What they would prefer though is that they can just give them money and let them worry about things. They don’t want to worry about whether they just hired a person with a spouse or child that has some major medical condition. They don’t want to worry about helping manage catastrophic claims or running wellness programs. They don’t want to deliver the bad news once a year to employees that their costs are going up or their plan is changing.

So while brokers may or may not believe in the value of a Private Exchange, they do need to worry about other brokers who aggressively market Private Exchanges because employers who think they can get out of the medical insurance “risk” business will take the call and schedule a meeting. It is the employers’ perception that is the key.

Brokers need to engage their clients in a conversation and educate them as to what a Private Exchange is and isn’t. You don’t need to spend money with any vendor to be able to engage your clients in a conversation about Private Exchanges. In fact you don’t need to spend any money at all to offer one. What you should keep in mind though is what these employers may be looking for. I believe that the brokers or carriers that can deliver a solution for larger employers that can get employers out of the risk business will capture a market opportunity that few have yet to recognize. The opportunity is there. Who will act first?

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 http://www.hrtadvisors.com. 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.

XBOX – The Future of Employee Benefits Customer Service – Reposted from 2009

This article was first published in 2009. It is even more relevant today so I am reposting this along with a follow-up article on the same topic.

A few weeks ago my son asked me if he could use my laptop for his regular Tuesday night drum lesson. I could not imagine why he needed my laptop for a drum lesson. It turned out that his drum teacher was on the road and he was going to be giving his lesson via the internet using Google video chat. So, he took my laptop into our basement and set it on a chair in front of the drum set. Using the built in camera, speaker, and microphone, along with a wireless high-speed internet connection, my son played the drums while his teacher watched, listened, and instructed, from his hotel room 700 miles away.

A few days later I was talking to an insurance company sales representative about the use of web-based benefits enrollment technologies. He commented that one of the drawbacks of web-based, self-service enrollment systems was that participation in voluntary plans was significantly lower when compared to face-to-face enrollment meetings with a professional enroller.

It occurred to me that there were some interesting similarities between the two situations—and some profound differences. While my son’s drum teacher leveraged technology to create a “face-to-face” drum lesson and generate revenue, the sales rep considered the technology an obstacle which reduced revenue. It has been my experience that those in the benefits business, though not afraid to invest in technology, often struggle with applying the right technology to the right situation. Let’s address how brokers can leverage technology to improve customer service and generate more business.

For benefits brokers, leveraging technology is moving away from a “ nice-to-have” strategy and more towards a “have -to-have’. With insurance products becoming more commoditized, and some form of healthcare reform on the horizon, benefits advisors will have to adapt to a changing market. This new market is likely to result in both flat or reduced commissionable revenue and a shift towards fee for service revenue. If that is the case, brokers will need to become more efficient, managing more customers with the same or fewer employees, while improving and expanding customer service. One way to do this and remain competitive is by investing in technology.

So how does XBOX get into this discussion? Well, be patient, I will get there.

There are dozens of processes in a benefits brokerage operation that can become more efficient with technology, I will focus on just a few. Let’s start with a common process for most brokerage firms, the customer service call. When it comes to customer service most brokers are very responsive. In fact, when one asks brokers how they are different, the average broker’s response is that they provide superior service. This presents two problems to the brokerage firm that is truly trying to differentiate itself. First, I have yet to meet a broker that didn’t say they provide superior service. Second, most brokers are not able to quantify the service they provide. The typical service call is documented with paper notes or simply by typing notes into some database type system. Most cannot produce a report on the types of calls, response times by their staff, or which insurance companies are having the most versus least number of issues.

Not having reportable information may not be a problem with clients where a strong relationship exists. But, what happens when your contact leaves the firm and a new HR person takes over? It is at that time a brokers value may come into question. It is also a time at which the broker has a tremendous opportunity to demonstrate their true value.

For a new HR person the information you have can be leveraged to make that persons transition into a new job easier. However, according to John McKean in his book, “Information Masters: Secrets of the Customer Race”, only 5% of the body of knowledge about a client is available digitally and indeed only 20% of the knowledge is recorded at all.” For many brokers this is often the case. Therefore, though they may have provided great service, they can’t prove it to a new HR person. Thus they lose a competitive advantage over a broker who may be prospecting the same employer.

Another risk point for brokers is when a key employee leaves the firm. In organizations where information is not tracked all knowledge walks out the door with that person when they leave. This not only puts you at risk of losing your asset, but may result in a lapse of service to a customer. Information existing only in the minds of your staff is not a reliable service model.

A major problem for many firms is they don’t have an adequate system for simplifying the tracking of information. I once asked a service rep at a brokers office what her number one technology need was. Her response was very telling. She said her primary method of communication with clients on service issues was e-mail. She said it took her 11 mouse clicks to save an e-mail to her system, and she saved 60 e-mails a day. That’s 660 clicks! She spent an average of 45 minutes a day saving e-mails. While this person saved all her e-mails, another service person at the same firm said she didn’t save her e-mail correspondence because it took too long. The owner of this large regional firm thought they were all set with technology. The problem for his staff was the technology was the wrong technology. In a business environment with ever increasing demands for both greater productivity and quality, this may not be tolerable.

So, how does one make it easier to manage data and improve service? This brings us back to my son and his XBOX. , On most nights, XBOX is the primary tool my son uses to communicate with his friends. For those of you who aren’t familiar with XBOX, it is an internet based video game console that runs through a TV. It allows friends, each in their own home, to gather in chat rooms (up to 8 fiends at a time) and talk via a headset. If they want to play a video game they can play the same game. Two friends can also connect via video and see each other on each other’s TV screen.

Now move this technology into the business world. Imagine a broker’s client being on their “buddy” list. All clients should be on the buddy list. If a client needs to reach you they wouldn’t call and leave a message or send an e-mail. They could see if you are “present” simply by looking at your name in their Outlook. A green light by your name would signal you are available. Better yet, they could see the names of your service team and click on the name of any available person. Once clicked, a message would appear on the available service person’s screen asking to talk. If accepted, the service person would be instantly talking to your customer via the internet. This instant access eliminates any phone tag, saving substantial time. You could bring another person such as an insurance company claims office rep into the conversation if you would like. Viewing your client’s computer screen or even seeing the caller would be possible as well, further personalizing the experience. You could record the conversation and save it to a client file in your computer. Once the service issue is resolved, an e-mail could automatically be generated and sent by the system to the client thanking them for their business with no manual intervention.

Although this technology exists today, I have yet to run into a broker that provides this type of service. The combination of Microsoft Products called Office Communicator and Microsoft Office live is what I call XBOX for business. Other software firms have similar technologies.

Now let’s go back to the issue of voluntary benefits enrollment. You can be a broker in New York helping an employee in Texas through the open enrollment process. The employee can sit at a kiosk computer at work, put on a headset and click on the green dot on the screen to talk to and see a sales person in your office. If you want to show them where to click to enroll you can share their screen and even click for them. You can jointly go through their insurance needs calculator on the screen too. From 1200 miles away you can do a personal face-to-face voluntary enrollment, answer questions for the employee, and have the data transmitted into the insurance companies system automatically. This use of XBOX like technology will improve voluntary enrollment results while significantly reducing the costs associated with in person face-to-face enrollments.

It didn’t take long for a group of teenagers to leverage technology to conduct nightly conference calls without picking up a phone and paying an extra fee. In just a few years Microsoft has changed their behavior and created a new method of communication. It is not hard to imagine that businesses will adopt these same technologies in the next year or two. And for those that do, there are a whole bunch of college kids using these technologies in their dorms right now that will come well prepared to communicate in the new business world. What’s more, these same kids are also the insurance buyers of tomorrow.

Getting Handcuffed with Benefits Technology

Today I saw a presentation from a new HR-Benefits-Payroll technology vendor that I thought is pretty cool. It looked great. It is web, mobile, and social. It could even send text messages to employees. It has nice colors, pictures, and looked real user friendly. It is a true end to end solution. The system could manage all employee data from recruitment to retirement. Or some would say from hire to fire. Employers love it. At least some do. Yet I know that in a few months there will be something better in the market and in another 6 months something better again.

Today I also got two calls from benefits brokers asking about some benefits technology vendor they just saw wondering what I thought of them. I get these calls every day. For some I know their goal is to have some lead benefits enrollment system that will help them “tie their client to them” so that it would be more difficult to get fired. Or at a minimum they are looking to use technology as a competitive advantage. As I had written in my article titled “There is a Ghost Lurking in the Benefits World” (https://joemarkland.wordpress.com/2014/09/02/there-is-a-ghost-lurking-in-the-benefits-broker-world/) these brokers are looking for that silver bullet. However, while the broker is trying to tie the clients to them what is really happening is the broker is getting handcuffed to some technology vendor. They get stuck in some long contract with some ongoing monthly expense only to find out the solution they are handcuffed to doesn’t generate new business and is very quickly yesterday’s idea.

There are a few things I know about benefits technology. First, all clients don’t buy the same solution. They don’t buy the same health insurance. They don’t buy the same computer equipment. And they don’t buy the same benefits enrollment system. In fact I see few employers buying stand-alone benefits enrollment systems at all. At HR Technology Advisors we recently did a survey and found that of the top 15 benefits enrollment systems being used today only 2 are stand-alone benefits enrollment systems. The other 13 are leading HR and Payroll vendors that have benefits enrollment as a part of their system. Only one vendor has more than 10% market share. See my article “The Coming Obsolescence of Stand-Alone Benefits Enrollment Systems.” https://joemarkland.wordpress.com/2013/12/23/the-coming-obsolescence-of-stand-alone-benefits-enrollment-systems

While not all brokers are looking to tie their clients to them with technology, most will admit that they are looking for a competitive advantage. The problem with this strategy is that the result is often the opposite. They actually leave themselves competitively vulnerable. I had one of my broker clients tell me the other day that their competitor just signed a contract with a specific technology vendor. My advice to him was to let the other broker be handcuffed to one vendor. While your competitor enters the race with the 8th fastest horse you can bring in the top 5 and increase your chance of winning. What producer wants to enter a prospect meeting with the 8th best anything?

I realize that just because a broker signs with one vendor does not necessarily mean they sell only that vendor. The problem though is that they often feel an obligation to “get their money’s worth” so they end up pushing that one solution and become blind to alternatives. They do seminars and webinars on that one solution. They train their staff on how to “sell” that one solution but don’t train them on how to become better at being a ‘trusted advisor” around technology to their clients. The producers bring this solution to clients and prospects with the belief that they have the best thing only to quickly find out there are many good solutions in the market. As we all know technology changes fast. Unless you bought your car, TV, cellphone, or computer in the last 12 months the odds are you aren’t using the best technology.

There are so many great technologies in the market and so many good things brokers can do for employers with technology there is no reason to limit yourself to one. We know all clients don’t want the same thing. Today’s technology will be yesterday’s technology in 6 months. No one vendor has cornered the market with some great idea though some vendors will certainly try to convince you that is the case. The good thing is you can be even more competitive by having more options. So be careful for what you wish for. While you seek that idea that will tie your clients to you, you may be the one that gets the handcuffs.

An Alternative Approach to Private Exchanges

Note: This was published in December 2012 but never on this blog.

It seems like there is not a day that goes by where one does not see a press release about some broker, technology company, or carrier, launching their version of a Private Health Insurance Exchange. As someone who regularly speaks with staff from these companies any discussion inevitably turns to Private Exchanges. What I have learned from these conversations is that there really is no clear definition of what a Private Exchange is. The term Private Exchange is so loosely used in the market that it seems anyone can put out some press release about a Private Exchange with no need to define what it really is or even more so, why it is something that is good for the customer. These press releases have created such a buzz in the market that many brokers feel a need to respond quickly with their version of a Private Exchange regardless of what it is or if it has any value. This article will give another perspective and ask some very pointed questions that I think the reader should contemplate. In the end I will suggest new ideas that may give you a marketable alternative position on Private Exchanges. Lastly, this article is my perspective on Private Exchanges. This does not represent the position of my company, HR Technology Advisors, at this time.

Over the past 14 months I have attended two conferences where there have been panel discussions about Private Exchanges. On these panels were representatives of a carrier Private Exchange company, technology vendors, actuaries, brokers, and consultants. The audience consisted of close to 100 insurance brokers. The purpose of the panel was to discuss and conclude where we think the Private Exchange market was going. On both occasions one of the first questions asked was:

“Do you consider a single medical carrier with multiple options and Exchange?”

The universal answer was No. One medical carrier with multiple options sold in conjunction with other coverages each with multiple options is what we called a cafeteria or flex plan in 1988. Such a plan would have a defined contribution from the employer in which the employee can spend as they wish to purchase various benefits. The difference between now and then is that technology is available today to help guide the employees through their decision process and enroll employees online.

From an underwriting standpoint giving people options to choose plans that fit them just invites the same problem it did in 1988, adverse selection. I remember back then we sometimes would worry about adverse selection when there were hired enrollers who could help the individual choose the best plans for them. Today, the online decision support tools provide the same assistance. The problem with both is that if everyone chose what was best for them there would be adverse selection which generally worked against the goal of the employer which was to reduce costs or keep them from growing too quickly. This is all assuming the client is experience rated.

Some Private Changes may be underwritten as multiple employer groups. If this is the case then it is the insurer that needs to worry more about adverse selection. Such pools would need to include large populations in order to spread the risk of adverse selection. In these types of insurance pools employers would not be able to self-insure. Ultimately the price of such plans will reflect the experience of the group preventing people from “gaming” the system for too long. In states like my home state of Massachusetts laws already exist that require insurers to pool their risks for the less than 100 employee marketplace. In these states Exchanges can be more easily created because the insurance products are already underwritten in bigger pools.

Other Private Exchnages are created for larger employers (2000+ employees). These Exchanges may have multiple medical carriers with multiple options each. In these situations employers are often self-insuring and therefore need to once again pay attention to the spread of the risk.

Regardless of how the risk pool is created there doesn’t appear to be any real cost savings from Private Exchanges other than cost shifting back to the employee. The idea being sold in this model is that the employer could pass on future insurance rate increases to the employee. From a pure insurance perspective the game of trying to find a better risk pool continues with Private Exchanges. In today’s market most Private Exchanges have only one medical carrier and most are underwritten on the single employer level or large pools for small group in existing small group reform markets.

Exchange Technology

Another conclusion from our two panel discussions was that for employer sponsored plans the technology used to purchase products from an insurance exchange should be viewed separately from the actual insurance products. Most of today’s Private Exchanges package the technology with the insurance products in advance. In my opinion this is not a good solution for the employer or the employee for several reasons. They are as follows:

  1. Current Private Exchanges appear to be charging excessive fees for the technology. While the average benefits enrollment system costs $2.00 – $4.00 PEPM Exchange technologies have been seen to charge $6 – $10 PEPM. In the short term these higher prices may be sustainable but I believe within the next 12 months these prices will come down substantially. Wouldn’t it be better if the employer could shop the insurance plans separate from the technology to keep them both competitive?
  2. This practice of packaging technology with the insurance products is also not “employer friendly” from an administrative standpoint. If I am an employer and I am already using some enrollment system or maybe even a more robust system that integrates HR, Benefits, and Payroll would I have to stop using my existing system to buy into one of these Exchanges? How would I now automate payroll deductions? As an employee would I now have to log into one system to see my payroll and request a vacation day and now another to enroll in benefits? From my perspective this would be moving employers in the exact opposite direction of where they are trying to go with their internal HR- Benefits – Payroll technologies.
  3. What happens if I want to switch my carriers? Do I lose my technology and therefore have to go through the whole process of setting up a new system. Employers change insurance more frequently than they change technology. Changing technology is a much more difficult process. To put the two together only creates more problems for the employer. Employers are already understaffed in their HR Departments. To add more of a burden administratively at this time is not a good idea.

One question I would ask any carrier that is offering products in a Private Exchange is whether they would offer the same products on some other technology platform. Are insurance companies going to limit their distribution to a single technology vendor? This may make sense for the less than 50 employee market but does not make sense for the 50+ market. Think of this for a moment. Two companies, ADP and Paychex, control close to 75% of the benefits enrollment technology market that integrates with their payroll. Are medical carriers going to ignore these companies when they have such a presence in the market? If I am ADP and you start replacing my benefits enrollment business I am going to take action.

As a broker do you think selling a Private Exchange to an employer and requiring they use the Exchanges technology is good advice? A unique position in the market would be to help employers use either existing technology or offer a more robust technology (with HR and maybe Payroll) rather than force them into either a new or limited capability system. This does not mean an employer will never purchase a Private Exchange with proprietary technology. If they want one, call then vendor up and see what they have. Employers simply should be aware of all the options and any implications resulting from their purchase.

One final thought about this concept of a Private Exchange really has to do more with where the market is going. I would imagine every insurance company is in the process of developing their plans on how to participate in a Public Exchange. We are just months away from every company having to have some solution if they are going to participate in insuring this large number of new customers that President Obama has promised. Health Care Systems are also making plans for this new health care world. Would it be wise for a small to mid-sized employer to move into a Private Exchange at this time when within the next 6-12 months there may be a wide range of new products available? It will be interesting to see who is encouraging a move now versus waiting to see what the insurance world will bring.

In summary, while many in the business are running around creating Private Exchanges I suggest there may be a better alternative position. First, separate the technology from the products. Ask insurance companies if you can use their products on other technologies. Second, advise clients about what is really going on in the market. Do you advise an employer to make a change now? Do you understand the technology they are using to manage benefits today? Would a change be disruptive? Third, understand the technologies that have the capabilities to manage these exchange offerings. Can they manage a defined contribution plan? Do they have Decision Support tools? Do you know the capabilities of firms like ADP and Paychex? What other solutions are in the market and what do they cost? In the end a more educated approach to the market should make any broker a more valuable resource to their clients.

An “Arms-Length” May Be the Distance Between Winning and Losing

The benefits world, much like many other industries, is constantly changing. You don’t have to look far to see other industries that have been impacted by new technologies (cell phone business) disruptive distribution models (Uber in the “taxi” business), or sometimes simply changes in buyer preferences (healthier food – Whole Foods). In the benefits brokerage business you have firms expanding services into HR and Wellness, payroll firms like Paychex entering the benefits business, and new entrants like Zenefits disrupting the market providing free technology and services in the HR and Benefits areas. The thing about competitive markets is that you don’t get to vote on what the market wants or what your competition may do. You have to recognize the market changes and make strategic business decisions on how to position your firm for this new environment.

Change is tough and not everyone wants to change. Some move forward with a strategy of “hope” that the changes are only temporary and the world will return to normal sometime soon. Others simply sell-out. Then there is the broker that reacts to the market by creating all kinds of partnerships. As one broker told me, “I really don’t want touch this HR and Payroll stuff. I prefer to stay an arms-length away.” To me arms-length sounded like he really did not want to “own it”. If things got messed up he can blame the other guy. Arms-length is a safe position.

The thing about arms-length is that clients and prospects recognize this lack of ownership. There is a difference between “we” and “they”. I was on a sales call with one broker who was talking technology to his client and he kept on saying “they” when referring to the vendor. You can tell the employer was thinking “why don’t I just do business directly with “they” and why do I need you”. Needless to say this broker did not get the business. This arms-length position resulted in a loss.

I had one of these new brokers call me one day soliciting my benefits business. She promised to provide free technology and offered to handle all my employee questions if I were to make her firm my broker. This made me recall a conversation I had with another broker about providing an employee benefits call center. He basically said he did not want to provide such a service because he did not want the liability. I thought to myself that as an employer I did not want the liability either. My employees come into me asking questions about their benefits and I wish they could just pick up a phone and call someone else, maybe a benefits professional.  I provide benefits but don’t ask me the details.

As your business world changes sometimes it may take you places that are out of your comfort zone. You can choose to go there or not. If you don’t want to go there then you can’t expect those companies that want such products or services to be your prospects. And while there may be some things you can bring to the market at an arms-length there may come the time when “they” needs to become a “we” simply to remain competitive. An arms-length may be the distance between winning and losing.