Tag Archives: Benefits Technology

The Launching of Our New Company – ProHCM – A return to our Why


When we (my brother Jerry, and soon after, my current partner Don Rowe, and I) started our business in 2001 I remember thinking about how noisy the benefits technology market was. There were so many benefits type technology vendors calling on benefits brokers that most people’s heads were spinning. The mantra of the day was “use my technology” and you will have a competitive advantage. And the vendors would sometimes directly say, but more often simply imply, that “if you don’t use my technology then I will partner with the broker down the street and take your business”. I really hated that sales strategy though it worked for many. The vendors capitalized on the brokers fear of losing business. 

When it came to things like benefit websites I wondered if anyone would ever use them, or more so, if anyone cared if anyone used them. I remember one broker telling me he was spending $100,000 per year on benefit websites. I asked him why he was wasting so much money when you can buy the same thing for $10,000. He said, “it doesn’t matter, it helps me win business”. Is that what this market was all about? I didn’t want any part of that. Here we are 15 years later and 76% of employees still don’t understand the term co-insurance, so I guess nobody is looking at them.

Our mission was never to just sell technology. What we really wanted to do was use our knowledge of how to apply technology to solve a business problem and our knowledge of the HR technology space to help employers simplify the administration of their Payroll, HR, and Benefits and expand employee self-service. This would free up time in HR, enabling staff to work more strategically and have more time for their employees. It would also deliver a communication and administration system to help employers bring new products and information to their employees. Over the past 15 years we have helped over 1000 employers find and implement HR technology solutions. Technology was the tool but our goal was to help get better outcomes. We really wanted to make things better for employers and employees.

It had also been our vision to help employers help their employees create better work-life balance and be happier at work and/or at home. If you are going to work hard to get through life I guess you deserve to be happy. I often tell the story of an employee of mine, a 23-year-old single mother, who one day called me crying because she could not get to work. Her car did not pass inspection because her tires were bald and she did not have the $500 for new tires. I proceeded to give her my credit card to buy new tires so she could get to work. I imagine my father, who with my mother, raised seven kids and often worked three jobs six and a half days a week had his share of stressful days, though he did not show it. And I wonder if he had an outlet when things got tough. He did this for 40 years. I don’t know how he did it.

I am not telling this story to let you know how nice a guy I am because I know this type of story plays out regularly in businesses across America. The bigger story is that most employers know that employee happiness and stress impacts productivity. And as an employer you hate to see hard working dedicated employees struggle to make it through a day. Life is not easy and one’s personal life and business life often conflict.

One problem is that over time we somewhat strayed from our initial vision. In Simon Sinek’s book, “Start with Why” he says your How’s and What can change but your Why’s should not. Unfortunately, we slowly strayed from our Why and became a technology consulting business and not a business that actually helped employers simplify their world and help the end employee create better work-life balance. Today the term being used is employee “well-being”. While many employers were buying technology with good intentions, many of them did not have the capacity to leverage the technology in a meaningful way. They may have improved HR operations to a degree but the outcomes had fallen way short of their goals. The technology was supposed to be a means to the end but it became the end. We advised employers on technology but our business did not follow it through to the very, very end. Did the employer ever reach their objective? Most don’t.

The other day I met with my staff to discuss our vision, our Why. I asked some people why they think we as a business, exist. One of my employees said, “to make brokers lives easier”. Another said, “to give brokers a competitive advantage”. It was enlightening and said a lot about where the business has drifted. I told them I do not wake up every day hoping to make brokers lives easier or to give them a competitive advantage. We think we what we do can provide a competitive advantage but that is not our Why. It is not what drives me or my partner. We also did not start the business to simply advise clients on technology or sell software. We started because we wanted to help employers help their employees.

Working with brokers is our How! Making it easier for them to help their employer clients and the employees is one of our tasks, our What’s. But it is not our why. The initial thought was that if we can pool resources and work collectively with local companies (Brokers and HR consultants) that shared the vision we could deliver a great solution to the market. We could centralize buying power and services. We could work with brokers to deliver the onsite local service. Sure we could leverage technology along the way but that was not the end. The technology is simply another tool, or resource, no different from my staff or the staff of our broker partners, to help employers create a better HR world for themselves and their employees.

For most workers they probably don’t go to work because it fits with their Why. If you are living paycheck to paycheck one’s Why is to do whatever it takes to pay the bills and support one’s family. A noble cause. I am pretty sure my father was not thinking of his Why. He just did what he had to do. In today’s environment employees are also more financially strapped with large college loans, increased health care costs, some still suffering from the housing crisis, and flat wages. For many, things are worse, not better.

   
The opportunity and need to help employers and their employees is greater than ever. The technology has advanced to become more user friendly and more engaging to employees. The number of vendors providing products and services in the HR area has expanded and range from new HR technology, to employee loan programs, online EAP programs, wellness, and more. And the daily use of mobile technology by individuals has exploded. However, the challenges for employers in the HR area are also greater as more laws, a more complex workforce, and emerging technologies have made HR even more chaotic with even less time available for change. They need help and not just someone who drops technology off at the front door. As many may have heard me say before, employers are needing landscapers not just lawn tractors.

So in 2015 we decided to re-focus our business and return to our initial vision, but this time we are doing it a little different. We are now laser focused on delivering better outcomes by providing services, not just technology, for employers and their employees. We don’t want to sell technology that nobody uses or deliver programs to employees that few ever use. The focus is on delivering the outcomes that will make a difference in their work-lives. We want the HR person to have less stress. We want employees who need help with some financial issue to have an outlet. We want the CEO to have actionable data. We want employees to understand their benefits. We want them to use their technology in an optimum way. We want to help.

To accomplish this, we felt we needed to combine centralized services with local services. We needed to add the staff with the skills but also needed the scale, and buying power. And we needed partners who share the vision and are as vested in delivering great outcomes as we are.

This new organization is called ProHCM. We view ProHCM as a franchise model of a national HR/Benefits/Payroll technology and services company with brokers as vested owners and service providers in their markets. ProHCM is a collection of Human Capital Management experts working together to deliver products and services that will guarantee better outcomes. It is a team effort.

So to those brokers out there that want to be a part of something unique, join us to create some better days for HR and their employees!

Understanding the Benefits Broker Role in a new HR Ecosystem


This was written for Employee Benefit Adviser Magazine. The link to the article on their blog is here.

When the iPhone first came out in 2007 there were no apps other than what Apple provided; no third-party products like phone covers, car chargers, headsets, or wireless speakers. If you dropped the phone and broke the glass you couldn’t take it to the local mall to have it repaired.

Here we are nine years later and there are over 1.5 million apps. There are add-on products sold online, in pharmacies, convenient stores, airports, and all kinds of other retail stores, that make the phone more useful. If you wanted to write an app for the iPhone there are skilled programmers available around the world. And if you dropped your phone there is some person at the local mall who could fix it.

The majority of these products and services are not provided by Apple. They are provided by some person or company that one day made a decision to capitalize on the success of Apple and build something that users of Apple products would value.

According to the Financial Times, “technology ecosystems are product platforms defined by core components made by the platform owner and complemented by applications made by autonomous companies in the periphery…the core firm’s product has important but limited value when used alone but substantially increases in value when used with the complementary applications.”

In the HR/Benefits technology world the same rules apply. There is a core product and there are periphery products and services. A core product with an advanced ecosystem will have much more value. If you are an advisor in the benefits business it is important to know which products are core and which are periphery. If you are providing services it would be important to know how your service fits into the HR/Benefits tech ecosystem.

Many benefits brokers are not recognizing these HR technology ecosystems. Many think the benefits technology vendor they have chosen is its own ecosystem or the center of the clients HR world. At one time people thought the Earth was the center of our solar system too. This belief caused many problems with keeping the calendar, sailors navigating at sea, and keeping track of Holidays.

Thinking that benefits technology is the center of the HR Ecosystem also results in problems. Benefits aren’t easily administered or communicated. Systems delivered by brokers often aren’t easy to use or have issues with “integration”.

Working in a vacuum delivering siloed software creates the problem.

The HR technology market is in the midst of big changes. The market leading vendors are making efforts to grow their ecosystems to create more value for employers and employees while also creating space between themselves and those that want to take their business.

If you are a benefits broker it will be important to recognize this market change. You need to make decisions as to who you think the winners and losers are going to be. You would need to think about how what you do will fit into these HR ecosystems. This could impact everything from the products one sells, advice one gives, and the services one provides. Private Exchanges, benefits administration and communication are all impacted by how the HR ecosystem evolves and how these products/services fit in.

When it comes to benefits technology I always remind brokers that it is important to understand the tools of one’s profession. Understanding how technology impacts the benefits business does not make someone a technologist. It makes someone a better broker.

HR Technology is going through an evolution much like the cell phone business except we are 7 years behind. A few years from now there may be fewer vendors with much bigger ecosystems.

Providing some product or service that enhances the value of the right core HR technology solutions is an opportunity that can become very lucrative. At a minimum understanding the “tools of one’s trade” is a requirement to simply being a better benefits advisor. Either way, pay attention, because the HR/Benefits technology world is about to change.

Webinar Announcement – Introducing HR/Benefits Technology 3.0 – A Whole New Technology Engagement Strategy for Benefits Brokers


I am conducting a webinar for benefits brokers that introduces HR Technology 3.0. If you are a broker and interested in attending click on this link here . The dates are June 3rd and June 7th at 12:00 EDT. This will be a good one that I have been developing for some time and have done a lot of research. If you are in the benefits business then I think this will be valuable.

Here is my overview.

Just when you think you’ve figured out the HR/Benefits technology marketplace, the market changes and a whole new HR Ecosystem arrives. What you thought was right just a month ago may no longer be as HR Technology 3.0 is upon us. With $2.1 billion in new investment capital coming into the business, it is going to come in like a storm. It is an opportunity for benefits brokers to approach prospects with a whole new idea that is intriguing, forward thinking, that can deliver outcomes in the HR area that few employers have realized.

In this webinar we are going to introduce HR Technology 3.0 and paint the picture of how brokers can bring this to market. We will even role-play the sales presentation that we think can create the wedge needed to upend existing relationships. The agenda is as follows:

What is HR/Benefits Technology 3.0?
How this changes the broker/employer conversation
What technology vendors will be the winners and losers?
What is the broker’s role in this new world?
Role play of a prospect presentation.

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!

Zenefits CEO Resigns – In Comes the A Team


If you haven’t heard the news yet Parker Conrad, Founder of Zenefits, has resigned as their CEO. He has been replaced by David Sacks, the Zenefits COO and a Zenefits investor, who was a past executive at PayPal. You can see the announcement here along with a letter from the new CEO to the Zenefits employees here. http://www.buzzfeed.com/williamalden/zenefits-ceo-parker-conrad-steps-down-after-compliance-failu#.ragvaZeXZ

While the resignation of Parker Conrad may be a surprise to some this doesn’t surprise me at all. It is not uncommon for investors that pour $500 million into a company to eventually put in their own management team who may have more experience in running larger organizations. In this case you have a rapidly growing company in a very regulated environment whose CEO was not afraid to openly challenge regulators, call out his competitors on his website (unusual behavior in my opinion), and find a way to get into a lawsuit with a large competitor, ADP. I don’t know Parker Conrad personally and only met him once, so I won’t speculate as to his motivation, but as a business owner myself I don’t know how getting a lot of people “shooting back at you” would contribute to the growth of an organization. I would think it would be a big distraction. Let’s give Parker credit though. He is an outsider who came into the benefits business and started the fastest growing benefits brokerage firm ever.

In the letter to the employees David Sacks states, “I believe a new set of values are necessary to take us to the next level. Effective immediately, this company’s values are: #1 Operate with integrity. #2 Put the customer first. #3 Make this a great place to work for employees.” Those are his words not mine. It is clear that while Zenefits was seeing record growth their culture was not aligned with what the new CEO and others on the management team along with their investors more than likely had in mind.

So what is next for Zenefits? I have said in the past that the Zenefits investors were not going to wait around until things blew up. It is their job to protect the investment whether it is their own money or the money from investors that contribute to various venture capital funds. So what we have is capitalism in motion. And what comes after version one of something is version 2. And version 2 will be better. Zenefits will get much better. I think they will become one of the most efficient small business benefits brokers/technology companies in the industry. Their value proposition is strong and in great demand. They simply have to get better at it.

In addition to a new CEO the firm has added some notable members to their board including Peter Thiel, co-founder of PayPal. I have referenced Peter’s book “Zero to One” in a few of my past articles including Market Disruption is Coming to the Benefits Business and at it will Come from the Outside Not In”. Peter is focused on being different but not simply for the sake of being different. One of his quotes from his book is “All failed companies are the same: they failed to escape competition.” Zenefits will continue to try and avoid competition. I encourage people to read his book because it will certainly shed some light into the type of person and experience Zenefits is adding to their board and management team.

One thing I found curious is how the two articles I have read on this topic referred to Zenefits as a technology business for small businesses. In fact, David Sacks is quoted as saying, “I’m glad that Zenefits is one of the fastest-growing business software companies …. we help them (small business) achieve something larger than themselves, by making it easier to hire, onboard and manage employees.” It doesn’t say they help employers provide financial security for their employees by providing great benefits programs. The benefits advisory services still appear to be secondary to the Zenefits main purpose though don’t count on them keeping their head in the sand. I am sure their management team is well aware where their revenue comes from and will see even greater challenges in the event that small group commissions get reduced or even go away.

One interesting observation is that one of the main investors in Zenefits is Fidelity. Yes, the same Fidelity that recently entered the benefits business as a broker as an addition to their 401K business. I am sure their investment business is not that connected to their new benefits brokerage business but maybe there is more to it than one may think. Fidelity wasn’t in the benefits business and now they are in directly and through an investment in Zenefits. Is this a coincidence?

Zenefits is here to stay and is going to be bigger and better. And don’t think firms like Namely, Gusto, Paychex, and even ADP don’t take note of who is running Zenefits, who their investors are, and who is on their board. They know because it is their job to know. But Zenefits is not the only one. I hate to reference one of my recent articles again (well not really) but it was only a few weeks ago where I wrote, “Fidelity Enters the Benefits Business – Why Many Others Will Follow”. More non-traditional benefits brokers will be entering the business, and they will be doing so in droves. If you are a traditional benefits broker, I think you need to know.    

Your HR/Benefits/Payroll is Leaking – And Your Broker May be Causing Some Leaks


I live in the Northeast where the last winter was just brutal. We had so much snow that roofs were caving in. It seems like half the houses in my neighborhood had leaky roofs. The leaks always happen where rooflines meet or where pipes connect. The water gets in and then freezes, expanding the boards or pipes where they connect, and then when the ice melts the water flows into the house. The weakest points in the construction is where things connect. The same goes with technology. The weakest part of any technology solution is where systems “integrate” or connect. We consult employers on HR/Benefits/Payroll technology, and the most common problems, by far, result from systems that don’t integrate at all or more often are poorly integrated. Or from some service provider that is “disconnected” from the technology. I will get more into that later.

Anyone who has heard me speak before will know that I think “integration” is synonymous with fumble or problem. When someone says we “integrate with” and it is easy, I say run for the hills. They are lying to you. This week after dealing with even more of the same issues it made me think of the leaks in my house last winter. Where things connect there are leaks. In a relay race the baton is dropped. In football snaps and hand-offs are fumbled. And those football fans out there know turnovers kill you.

Let me give you some examples of what I am talking about.

Example 1

In one situation an employer had their payroll system integrating with their benefits system (two different vendors). Everything was going fine until the employer bought a new company. The employer added this new division to their payroll system thinking “integration” meant the new division would be added to their benefits system. Well, integration is a very loosely used term. So, for 30 days the employer was adding new employees to the payroll system that weren’t being added to the benefits systems. After that was fixed it was found out that the new employees weren’t going over to the carriers on their EDI files. Leaks were everywhere, and it created chaos. If the employer had one system that handled the payroll and benefits, there would not have been any problems.

Example 2

A benefits broker and one of his clients decided to come up with some unique employee contribution plan for medical insurance. It was creative. However, when they called their benefits enrollment vendor the vendor could not handle those contribution rules. These rules had already been communicated to employees. Their benefits system that had been in place for over year no longer worked. The broker blamed the vendor. I know benefits systems, and I don’t know of one benefits enrollment vendor that could handle this type of contribution calculation. The consulting process was “disconnected” from the technology. Fumble! The employer had to turn off the enrollment system and go back to paper enrollment. Had the broker and the employer engaged the technology vendor during their planning this could have been prevented?

These types of problems are everywhere. I can list 100 places where there can be possible “leaks” because things are not connected. In example 1 above the technology was not totally integrated. In example 2 the advisor did not connect the advice with the ability to administer the advice that was provided.

A few years ago I was flying from Chicago to Colorado Springs, and I sat next to a guy who was the VP of HR for an 1,800 person firm. After we got speaking he told me that in the HR area he had 17 different relationships. Between technology vendors and service providers he had 17 contracts, 17 places to call if there were an issue, 17 bills, and 17 logins. It was a mess. His mission was to eliminate as many systems and vendors as possible. There simply are too many moving parts. And this is a 1,800 person firm.

Think about the number of vendors an employer may have in the HR/Benefits/Payroll areas. I will give it a try.

(Technology Solutions: 1. Payroll Administrator/Technology 2. Time and Attendance Tech. 3. Benefits Enrollment Tech Vendor 4.  Recruitment Technology 5. Expense Management 6.  Performance Management 7. Training 8. Intranet provider)

(Advisors: 9. Benefits Broker 10. 401K Consultant 11. HR Consultant)

(Service Providers: 12. COBRA Administrator 13. FSA Administrator 14. Life Carrier 15. LTD 16.  STD, 17. Medical 18.  Dental 19. Vision, 20. Voluntary products 21. Wellness Vendor 22. EAP)

This is 22 different vendors, and I can think of more. Now we are seeing all kinds of additional products entering the market including financial wellness programs, employee discount programs, employee gifting programs, college planning services and many more types of companies hoping employers will offer their services to the employees. Many of the programs, when rolled out, fail, because the employers are already overwhelmed and for the employee there is information overload.

Employers want to simplify. I put in a benefits enrollment system for an 11,000 person a few years ago who said she wanted the cheapest option because she will be replacing it in a few years anyway with a single HR/Benefits/Payroll systems. If larger employers with lots of staff want to simplify, then what would one imagine smaller employers with less staff will want to do.

It is not just the technology though, and this is a very important point. Disconnected service providers or advisors also create problems. I am going to pick on benefits brokers for a minute here because most of my reading audience is brokers. I have seen benefits brokers put benefits enrollment systems into employers that had already purchased but not deployed an enrollment system from their payroll company. I have seen voluntary products sold that don’t fit on most enrollment systems. Recently I had a broker put in an ACA solution for a client that did not know their existing Payroll/HR/Accounting vendor could provide the solution.  Brokers are regularly advising on technology without the knowledge to properly advise. Now we see brokers investing in HR and Payroll systems with little knowledge of how these things work. This will cause leaks. Leaks are problems that will get brokers fired.

These same stories apply to 401K consultants, HR Consultants, and many other service providers or advisors that don’t connect their advice to the technology. Let me ask this question. Should a broker that is advising a client to offer voluntary products understand the technology that the employer may already be using to administer their benefits? Should a 401K Consultant?

As this HR/Benefits/Payroll world gets more complex, operating in silos will contribute to the problem. The benefits consulting process cannot be independent of the client’s technology environment, payroll, and even other products an employer may be offering their employees. The opportunity exists for service companies to solve this problem for employers, but to do so will require a level of skill and knowledge that few companies have. Organizations running into this market without the knowledge, skills, or proper training are only contributing to the problem. As stated earlier, this can get you fired.

In my company we are building a program that I will call the “No More Leaks HR Program.” We are working with benefits brokers and HR Consultants to help them gain the knowledge, develop the skills, and train their staff to do this effectively. Someone needs to quarterback this whole HR/Benefits/Payroll technology and services world for employers. Someone needs to eliminate or connect the silos. This is not something you decide to do on a Monday and deliver on Friday. This is not a “value-added service.” It takes work, planning and training to do this right. But the rewards for being great at this can be tremendous.

Market Disruption is Coming to the Benefits Business and at it will Come from the Outside Not In


According to a report released by the Department of Health and Human Services on October 26th health insurance premiums for 2016 will increase an average of 7.5%. This is in a market where inflation and interest rates are close to zero. It is no secret that the cost of health care is one of the biggest issues impacting the U.S. economy in the coming decade. With a $19 trillion deficit the cost of health care is a problem that is waiting for, and desperately needing, a solution. And if solutions don’t come then the solutions may be imposed on the industry as we have seen with Obamacare. Hillary Clinton, if elected, would certainly try to finish the job. Just last week she included health insurance companies and pharmaceutical companies on her short list of enemies along with the NRA and Republicans. Back in 1993 when Bill Clinton was pushing his health care plan Hillary, when asked what insurance brokers would do if the Government took over health care responded, “They can get another job”. The industry has a target on its back and the target is getting bigger. I think changes are coming. But it won’t be the government taking action this time. While some see the target on their backs others see the same target as an opportunity.

The opportunity to fix the health care cost problem in the U.S. is no secret. According to CB Insights “$14 billion of venture capital has gone to the insurance tech space since the beginning of 2014, with health insurance-related investments getting more than all other insurance sectors combined”. I have personally spoken to several Venture Capital firms who are studying the market looking to invest in companies that will disrupt the status quo of the current health care industry along with the employee benefits distribution business. Yes, there are many companies looking to put the current providers out of business. It is often easier for outsiders to disrupt the markets instead of the insiders. A taxi company did not create UBER, Blockbuster did not create Netflix, and Barnes and Nobles did not create Amazon. It may be because the current market leaders would have to step back before moving forward. It would be a very bold move to disrupt your own business model, often at a huge expense, based on the chance that your new idea would eventually pay greater dividends than the present model.

Those in the health insurance business know that it is the underlying costs of health care that drive health insurance costs. The outsiders do too. You can eliminate the insurance companies but not reduce health care costs to any significant degree. So these changes that I am referring to will attack the costs of health care. This will trickle down to benefits brokers because the majority of a benefits broker’s revenue is selling health insurance. These outsiders may or may not see the broker as a valuable resource in their future world.

While some benefits brokers are trying to be a part of this coming change, for the most part they are going to be spectators. Firms like Zenefits, Gusto, and Namely are disrupting benefits distribution by offering technology and other HR type services with benefits advisory services, and some brokers are pushing Private Exchanges like they are some new form of health insurance, but neither bend the health care cost curve. To paraphrase Peter Thiel from his book Zero to One, “Innovation must be something new not a slightly different version of something that already exists….and that innovation must be at least 10 times better than its closest substitute”. Private Exchanges, payroll/HR tech companies giving away free technology, and most of the other technology solutions in the benefits business that I have seen do not meet this definition of innovation. In fact, these companies too may be disrupted by those that bend the health care cost curve.

The true disruptors are going to impact the market in ways many of us may not yet even imagine. But they will come, because there are many people interested in bending the cost curve including the government, employers, employees, and any individual paying an insurance premium. And of course those investors who are spending billions of dollars. Those less interested are those protecting the status quo.

So who are these disruptors? Firms like Google and Apple are hoping to play a major role in the mobile health market. Apple’s HealthKit is designed to manage ones heart rate, blood pressure, cholesterol, take a temperature, and make that information immediately available to one’s physician. Google also happens to be an investor in the new health insurer called Oscar Health. Evolent is helping hospital systems enter the health insurance business. Theranos can do over 120 blood tests with the prick of a finger and substantially reduces the time and costs for such testing. There are hundreds of others on the horizon.

The health care marketplace is ripe for change. The political environment, expanding web and mobile technologies, and a cash rich, highly motivated investment community, are all aligned and ready disrupt the status quo. And the prize for success is very lucrative. That future has yet to be defined but change is coming. Benefits brokers will have a choice to fight the change or start looking for those outsiders that will need help bringing their new solutions to market. But there will be no choice. The winds of change are already blowing.

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?

Brokers Heading Down the Wrong Technology Path


A few people have said I write too much about Zenefits but in fact, I have been writing about the Zenefits model since 2009 and talking about it since 2002, well before Zenefits even existed. You can see my article on this blog titled, “Payroll Firms, PEO’s and BPO’s, Have Got it Right”. (See article here: https://joemarkland.wordpress.com/past-articles/) I have also conducted numerous webinars on the topic that can be seen on my website here: http://www.hrtadvisors.com/AboutUs/HRTWebinars.aspx . Over the last few months I have seen many brokers contract with some technology vendor to develop their Zenefits-like solution and based on what I am seeing I think most are getting it wrong. They aren’t really developing a competitive or sustainable business model. In fact their solution may be creating a false sense of security leaving their firms vulnerable to the competition.

This past week I spent significant time with a good friend of mine that is a benefits broker discussing the benefits business and this Zenefits phenomenon. He is probably the one broker who I think has truly changed his business model to compete in this new benefits world where technology and outsourced services have become a big differentiator. He still has much work to do but he gets it. With all the noise in the market and new technology vendors popping up everywhere promising to help brokers beat Zenefits we tried to separate the new noise from what we thought the employer market is really looking for when it comes to HR type technology. We had no agenda because we both want to make sure we build a sustainable business. Lying to ourselves would not do us any good. What we concluded was that what most brokers are doing to compete with Zenefits is most likely wrong. The emerging broker models of partnering with some HR and Benefits only vendor (without payroll) is most likely not sustainable and many of the technology vendors will not make it. Here is why.

HR and Benefit Systems without Payroll have a short future.

At my company we have been consulting employers around these solutions for years and we definitely see employers moving to a single system for HR, Benefits, and Payroll. In fact, very few vendors even exist anymore without payroll. There are exceptions but it is a shrinking market. That is until Zenefits came along, but we don’t think Zenefits really is a technology play. I cover that in my webinars. And we believe that even Zenefits will build, merge with, buy, or be bought by a payroll company. Not because they want to but because they will have to. The only employers that will want HR and Benefits systems without payroll will have fewer than 30 employees so maybe Zenefits can survive there without payroll. Trying to integrate a HR and Benefits system with another payroll system is a problem employers would prefer to avoid. Even Zenefits is struggling with this and it probably consumes their resources. Yet most of the new vendors marketing to brokers have HR and Benefits without payroll. Do you know why? It is easy relative to payroll. Understanding and marketing HR and Benefits systems without payroll is also easier for most brokers. What we see is that it is primarily benefits brokers marketing these types of solutions. The rest of the market including HR Consultants, HRIS Consultants, PEO’s and BPO’s are not. Also, almost every HR-Benefits vendor is adding payroll and almost every payroll vendor is adding HR and Benefits. Look around and see how many third-parties are selling just HR and Benefits systems other than brokers. Hardly any. That is for a reason.

Selling or “giving away” someone else’s products does not change your business or build an asset.

If the benefits world changes and revenue for small group insurance gets cut significantly then the revenue from the other products and services that firms like Zenefits provides will need to come into the broker’s organization and not the third-party vendors coffers. The company that provides the value will be the one receiving the revenue. So selling someone else products does not build your asset. It builds the other vendors asset. Brokers selling other peoples products are essentially giving away future revenues that may be needed to sustain their business if commissions gets cut.

Brokers are getting a false sense of security.

If you are a broker that sells or gives-away HR and Benefits systems without payroll your client is still vulnerable to takeover. First, every payroll company in America will still be calling on that employer with a complete solution (with Payroll). Other brokers, like my friend, will be providing solutions with payroll too. Employers will get tired of having two systems and will always be looking out for a better solution. They will take the prospect calls. So, for most of the employer market, HR and Benefit systems without payroll will more than likely be seen as a band-aid until they move to a better solution. And if it is free from a broker or Zenefits then it is not a bad band-aid but it is still a band-aid. I guess if it is free it can be considered a trinket.

Most brokers prefer to keep an arm’s-length between them and HR-Benefits-Payroll solutions.

I wrote an article on this too. (Link here: https://joemarkland.wordpress.com/2015/03/04/an-arms-length-may-be-the-distance-between-winning-and-losing/.) My major point with this really comes back to “selling someone else’s stuff”. If you want to be arm’s-length then you don’t own it. If you don’t own it you won’t get the majority of the revenue from providing the product or service. My broker friend was asked if one of his clients could be used as a reference for another broker who was looking to get into this business. The inquiring broker was looking to see what the client thought of the technology my friend was selling. The problem is the client would not talk about the technology but actually talk about how great the broker’s service is. You see, the employer’s payroll questions come into my friend’s office, not some third-party. His service is anything but arm’s-length. He owns it and he gets paid to deliver the solution while other brokers give things away. Another broker I know delivering a complete solution just landed a client with a fee of $70 PEPM.

Most of these points I have made over the past months or even years. This has not prevented brokers from making what I think is the wrong decision. I believe the reason is because the path most brokers have taken is easy. And as the old saying goes, “if it were easy then everyone would do it”. And everyone has. Selling someone else’s HR and Benefits system is easy but does not solve the employer’s bigger problems. I actually had one broker who put in a payroll system through me once say “Joe, Zenefits says they make it easy and this was not easy”. I had to laugh and I told him that Zenefits says they make it easy for the employer, not for Zenefits. For Zenefits it is tough. That broker proceeded to move to an “easier” solution for him, and promptly lost a prospect to another brokerage firm offering a full-blown HR-Benefits-Payroll solution. He didn’t know why he lost but I know because I was working with the winning broker.

Changing your business and competing in this new benefits world is not going to be easy. You will need to move out of your comfort zone. The good thing is that there are so many resisting change that when you do start doing the tough stuff you will find the blue oceans with less competition and more profits. And you deserve it.

Zenefits Has Crossed the Line


For those of you who have not seen it Zenefits, an emerging benefits broker offering free technology, has posted a comparison of their services to many of their competitors across the country. You can see the link here. https://www.zenefits.com/broker/ In my opinion this tactic goes below the line of ethical standards. Not only does it misrepresent what many of their competitors are offering but they seem to be excusing themselves if they are wrong by putting asterisks at the bottom of the comparison that reads as follows.

** Zenefits cannot be sure what services are offered by (Broker Name). Contact them directly to find out.

This one line does not excuse them from being wrong. It is disingenuous. And I am quite sure they did not go out of their way and call all their competitors to validate their information. I ask anyone who reads this blog to call me if they did in fact call you and ask about your services.

I know for a fact that much of this information is wrong as many of my clients are on this list and I supply some of the products or services that Zenefits says they don’t provide. Zenefits says, for just about every broker on their list, that the competing broker does not provide Benefits Administration Software or ACA Software Compliance and Administration. Many brokers on the Zenefits list provide these products or services. Whether they provide them FREE or not is another check box on their list but that can be represented fairly.

I was once given some good advice by a broker in Michigan when I was a young sales guy for UNUM. He told me to never say bad things about your competitors because 50% of buyers out there will think less of you and not buy. Why would you want to eliminate 50% of your prospects? I have taken that advice. That does not mean you can’t sell against other companies models. In this case Zenefits is not necessarily saying bad things about their competitors. However, I do believe they are knowingly misrepresenting the competition. If they are knowingly doing this then in my opinion it sinks to the level below of someone that bad mouths a competitor. At least a person that verbally bad mouths a competitor is not trying to deceive. I would rather have someone tell me what they really think even if I don’t like what they say.

Zenefits is a benefits brokers and wants to disrupt the benefits distribution market. Why they want to create enemies with firms like ADP ( See USA Today: http://www.usatoday.com/story/tech/2015/06/10/zenefits-vs-adp/71019080/ ) and now benefits brokers across America I don’t know. As a young athlete I learned to respect your competition but also play fair. My father used to use terms like “take the high road”. These lessons that we have all learned at a young age have been lost on Zenefits. I can only blame their leader. They should immediately take down these web pages and apologize to all those firms that they misrepresented. If they want to show a comparison then at least get the information right and don’t hide behind a ** at the bottom of the page.