Tag Archives: Benefits Technology

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

Posted on March 15, 2014 | Leave a comment

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

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

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

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

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

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The Coming Obsolescence of Stand-alone Benefits Enrollment Systems

Posted on December 23, 2013 | 1 comment

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

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

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

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

Benefits Enrollment Only

HR-Benefits-Payroll

2011

55%

45%

2012

35%

65%

2013

10%

90%

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

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

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

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

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

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

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

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

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

[i] HR Technology Advisors 2011 Study

[ii] Street Insider August 14, 2013

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

Posted on December 22, 2013 | 1 comment

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Private Exchanges – Technology is Not the Differentiator

Posted on December 13, 2013 | Leave a comment

I was talking to a benefits broker the other day about benefits related technology, more specifically about Private Exchange technology and health insurance Decision Support Tools, and the broker made the claim that “such and such vendor (I won’t name names) had the best decision support tools on the market. It is powerful technology, he said.” I thought this was odd and wondered how this broker drew that conclusion. He then proceeded to say that Decision Support Tools will be the big difference in the Private Exchange market.  Now that claim stopped me in my tracks and I immediately had to disagree.  

One thing I know about technology is that it is always changing. Just think of your car, your cell phone, and your TV. Has that technology changed over the last 3-5 years? For anyone to think that one vendor is going to perpetually have the best of anything is, in my world, crazy.  And a tool that can help employees decide which of three or five health plans they should choose is not powerful technology. The Space Shuttle is powerful technology. A website that takes someone through some fancy screens that has some back end logic is not. Such screens (I can’t get myself to say technology) with back-end logic is easily duplicated in months if not weeks.

Let’s look at this another way. Let’s assume you have the best technology. What percent of the market buys the best? Does McDonald’s have the best hamburgers? Does Taco Bell have the best Taco’s? Are there more people driving Ferraris or Toyota Camry’s. Do more people shop at Walmart or …..? You get it. There is often a price difference between the best and what the majority of the market can afford or are willing to buy. And for the record, I don’t know too many benefits brokers whose strategy is to sell the highest priced products.

So if you are a benefits broker and think you have found that silver bullet, that powerful technology, that is going to separate you from the pack, give me a call and I will show you a long list of companies who are going to make sure that one company does not rule the day.  And if you want to see powerful technology go out at night in a dark place and look to the sky and watch all the satellites fly by. Then I may agree you are looking at powerful technology.

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