Tag Archives: Employee Benefits Brokers

The Zenefits/OneDigital Partnership – It’s Magic


You may have seen the news about the Zenefits/OneDigital deal and the how Zenefits will now start working with brokers. This news reminds me of a magician performing a magic trick. They get you to focus on one hand while the other is where most of the action is happening. With this new partnership, most brokers are probably focusing on this competitor named Zenefits. The real story however is about the competitor named OneDigital.

The details of this relationship and how Zenefits may partner with other brokers has yet to come out. Let me speculate here. First, I would assume the OneDigital deal with Zenefits is similar to what OneDigital has done with other brokers in their small group outsourcing business. OneDigital gets 50% – 60% of the commissions to manage the business and the other broker gets 40% – 50%, or something like that. Without some significant share of the commission being retained by Zenefits this deal would not have happened. If Zenefits was giving away free software then they certainly can’t give away all the revenue and still employ all their people.

I would assume that any broker that wants to have a relationship with Zenefits will have to provide what OneDigital is doing. Handle all the service for 60% of the revenue. Or if they want to sell Zenefits technology, I would imagine the fees would need to be closer to what the market is.

The thing about OneDigital is they built a business based on leveraging technology in the most optimum way to drive down costs and provide better service. Brokers tell me all the time they can’t make money on small group for 100% of the commission yet OneDigital does it with only 60% of the revenue. How can that be?

The idea of combining HR/Benefits/Payroll technology with services is something we have been touting for years now. In fact, a shift in our business was made because of the need to provide the united services around the technology. Even Namely recently announced they are moving from a software as a service model to software with services model. These services include benefits brokering along with benefits administration and of course, HR and payroll.

The one-stop-shop for everything HR is an attractive value proposition for employers. Mike Sullivan, One Digital’s Chief Growth Officer stated in today’s Employee Benefit Advisors article that, “In a very client-centric way, the alignment of these two platforms makes sense for small businesses.” Indeed, it does.

This is not OneDigital’s first play in this space. It was less than two years ago when they announced their investment in GoCo. The title of the press release said, “GoCo Takes Zenefits Head on with Digital Insurance Partnership and Investment”. You can see that press release here. Even today Mike Sullivan is still listed on the GoCo website as a Board Member. I don’t know where this leaves that relationship.

What will come out in the coming days or weeks is how Zenefits plans to partner with other brokers. I wonder if and how the insurance commission is going to be leveraged to deliver this joint offering. Somehow, I don’t think this strategy of benefits commissions subsidizing HR technology game is over. Firms like Gusto and Namely are still combining benefits brokering with HR/Payroll technology and services. And we all know that other brokers are subsidizing systems across the country to get new business. As I have stated in the past, the idea of giving away free technology to get a broker of record started at least a dozen years before Zenefits was even founded.

Personally, I don’t think Zenefits has anything special, but OneDigital does. So, while most brokers are paying attention to what they perceive as the fall of Zenefits, I think the competitor to look out for is OneDigital. They will be knocking on your client’s door.

Note: This article is wildly speculative, but it is my blog. As more information comes out I will write again.

Your Competitors May Not Be Who You Think


This past week there were two press releases related to the benefits brokerage business that were fairly significant. One of them was picked up by the industry publications, generated some kudos on LinkedIn, and created some noise in the benefits community. Brokers were talking about it and many emailed me or called me to see what I thought.

The other one went mostly unnoticed in the benefits world. The industry pubs didn’t pick it up and I did not get a single phone call asking my opinion. Yet, from my perspective, the second press release will have a greater impact on the average benefits broker than the first.

This contrast made me think of a quote I keep on my wall that reminds me to not be complacent. It is from Jim Keyes, the former CEO of Blockbuster Video, who once said:

“Neither RedBox nor Netflix are even on the radar screen in terms of competition,” he said. “It’s more Wal-Mart and Apple.”

We all know how that turned out.

The first press release announced the merger of 20+ benefits firms, many who I know. While this is noteworthy, I am not sure that the world is any different today because of it. Yesterday they were wearing one uniform and today they are wearing another. They are the same people, in the same locations, and until there is some other new big announcement they are probably doing pretty much the same thing today that they were doing yesterday.

From a competitive standpoint, I am pretty sure this event won’t change the landscape much. Most brokers are already competing with larger firms that use their size and resources as their competitive advantage. Some brokers may even think this is good for them competitively because their market just lost another boutique firm and the competition of local boutique firms just got smaller. In reality, not much has changed until someone brings something new to the market.

The second press release was from a company called Namely. Namely raised an additional $50 million in capital bringing their total capital raise to $157.8 million. (Source: Venture Beat January 5, 2017) Concurrently, Namely also announced the following:

“Namely also announced today a new benefits offering called the Namely Health Advantage, which groups together similar companies to offer their employees health benefits at preferred rates.”

What makes this significant is that Namely has brought something new to the market. They have developed an engaging HR-Benefits-Payroll platform promising simplicity and ease of use. They also act as a benefits broker, creating a single source technology and service offering to employers. And as can be seen from the quote above, they created a new health insurance offering for their clients.

Namely claims to have 650 clients totaling 120,000 employees which would be an average client size of around 185 employees. Unlike companies like Zenefits, that targets much smaller employers (< 50 employees), Namely targets mid-market employers ranging from 100 – 1000 employees. From a competitive standpoint, this is the sweet spot for many benefits firms.

If you do the math and assume they are generating revenue at a $25 per employee per month rate, then their annual revenue would be in the range of $36 million. This is a real rough guess. Even if I am off by $10 million it would not be bad for a company that was founded in 2012. That would make them one of the fastest growing benefits brokers in the country. Though I am sure they would not classify themselves as such.

In 2015 there was $2.4 billion invested in HR Technology type companies. And as one industry analyst said, “Do you know what they will do with that money in 2016 and 2017”? Spend it. They will spend it on marketing and sales. They will have Ads on LinkedIn and Google. They will be at all the HR trade shows. They will be everywhere marketing to your customers and prospects. Namely has even had TV commercials on Fox News. I don’t see many brokers advertising on TV.

I could imagine asking the average benefits broker about their competition and it would not surprise me if they responded as follows:

“Neither Namely nor Zenefits are even on the radar screen in terms of competition,” he said. “It’s more Gallagher, Mercer, and USI.”

You may not have recognized this competition yet. Many brokers say they never lost a case to Namely or similar companies. What they don’t know is how many prospects they lost to these firms. How many employers looking for solutions found Namely but did not find you? How many prospects would respond to their value proposition versus yours? Do you even know what their value proposition is?

There is a way to meet and beat this new competition. But is takes work, planning, investment, and risk taking. Or maybe these firms are really nothing to worry about. Ask Jim Keyes what he thinks.

It’s a Saturday night and I should go. I could end this article by saying I am going to be watching a movie on Netflix tonight but playoff football is on, and anyone who knows me would know I am lying. But if you want to learn about these new competitors and what you can do to compete with them, check out our latest webinar titled, “The Future of Human Capital Management and Benefits” by clicking on this link.

“Fire” – Obamacare is Not the Only Healthcare Plan That is Burning


I had a short conversation today with a woman that was somewhat surprising and maybe very telling. I was having a prescription filled and I spoke briefly with the women handling my order. I had to give her my new insurance card (third carrier in 3 years) and mentioned how I had to switch often because of price increases. She then told me that she had a $4000 deductible and close to $15,000 in debt from medical bills. I was shocked. Her employer is a major employer and more than likely a benefactor of Obamacare, yet her deductible is $4000 and she has medical bills causing financial duress. I would imagine this story plays out across America. It is a system that is more than broken. It is on FIRE!

In this political environment where Obamacare is in the news daily I think the problems with employer-based insurance gets lost in the discussion. It seems like people have created a one-to-one relationship between Obamacare and the Exchanges. It is the Exchanges getting huge increases. Insurance companies are leaving the Exchanges because of big losses. Many markets only have one option. And of course you won’t have to switch your doctor. All this noise may be hiding the fire that is also burning in the employer healthcare market.

On the employer side, some of the same dire stories are playing out except the press seems to be ignoring them. Sure, if you look for stories like I do you will find them, but they aren’t on the front page of the NY Times or the lead story on the Nightly News. Relative to the fire burning in the Exchanges the employer fire is smaller, but it is still a big fire. I am sure the woman at the pharmacy was much more concerned about her personal “fire” from her healthcare expenses than what is going on with the Exchanges.

If you have employer based insurance, then you more than likely have a single medical insurance option. Your contributions may have increased by 30% or more over the past few years. Your deductibles and coinsurance may have doubled. You don’t even know what coinsurance means. And the odds are greater than 50% that you don’t have enough money in a savings account to pay for your deductible if needed.

If you are an employer, you are tired of the regular rate increases and delivering bad news to your employees. You have not been able to give employees raises. You may have tried PEO’s, captives, wellness programs, cost shifting, HSA’s, self-funding on smaller and smaller groups, or private exchanges, to try and control costs, but at best, are these are temporary fixes if they even work at all. I was once asked how can you reduce health care costs. I said don’t hire anyone old. Is that what this will come to?

While the focus of Obamacare has been on the Exchanges, Obamacare technically covers health insurance in its totality. Employer based insurance is a part of it and it is part of the problem. Fixing health care includes all of it, not just the Exchanges. It is all related. Government intervention putting the squeeze on individual policies, small group, Medicare and Medicaid only shifts the problem to employer plans. And when an employer with a younger population counters that action by going self-funded this results in the younger, healthier people, not contributing to the pool. We heard this before, you need the young to participate for this to work. The recent race to get younger groups self-insured impacts the entire system. The game goes on.

We can all speculate as to what Trump is going to do to try and fix the healthcare problem. Based on what I have been reading his focus is not limited to the Exchanges. He recognizes the problems span the entire healthcare industry and that includes the problems with employer-based health insurance.

For benefits brokers it would be naïve to think that the only change to employer-based insurance will be the elimination of the employer mandate. There is a fire burning at the employer level too and this fire is not unrelated to the other fires burning on the Exchanges. Most of the conversations I hear, or articles I have read, reference the Exchanges as something totally separate from employer-based insurance. I believe one can’t be solved without significant changes being made to the other. Anticipating what those changes will be and becoming part of the solution is a big opportunity. Stay tuned because we are about to see what the next administration has in store.

Is Your Benefits Firm Built to Handle a Benefits Bear Market?


I often reference a quote from Mark Cuban that says, “Everyone’s a genius in a bull market.” When you think about the benefits business it has really been a bull market since I have been in the business, which is 30 years now. Everything seems to be going up, up, up, regardless of the quality of the product or service. Benefits brokers have benefited significantly, getting medical inflation raises for years. Admittedly they have also been adding more services, often at no cost. But this is behavior you see in a bull market. It is easy when the math is in your favor. However, do we even know what a benefits firm would look like in a bear market?

I know what a benefits bull market looks like. Companies good and bad are thriving. Money is spent fairly recklessly. Wages are often above the averages for similar jobs in other industries. There are trips and more trips. Everything is great. Those are the good parts.

Bull markets can also have some negative effects. Weaknesses in one’s business or value proposition aren’t easily recognized. Inefficiency is hidden. Complacency can creep into the organization. There can be a failure to recognize competitive threats. Common business practices aren’t practiced. And a belief that one’s world will never change can blind one’s vision of the future or reality.

But what does a bear market in benefits look like? What can cause a bear market? Commission compression? A move to fee for service? Government intervention including changes in tax laws? Obamacare collapsing? The budget deficit getting higher with rising health care costs being a big contributor? The MLR? Hospitals getting squeezed? Higher deductibles and employee contributions? All these factors appear to be present right now, favoring a need for change. Could it signal a coming bear market?

Warren Buffet loves bear markets because he thinks there are deals to be made. And it is bear markets that allow the cream to rise to the top. Bear markets eliminate a lot of competition. But do we really know who the superstars are? Can we tell the real genius from the bull market only genius? And what does a bear market benefits firm look like? Without really having been in a bear market I am not sure what one really looks like.

If a benefits bear market hits there will be opportunities. Opportunities for those who have anticipated changes; for those who built a model to sustain over the long haul; for firms whose infrastructure can adapt quickly to change; for those who have worked hard to expand their non-medical revenue reducing some business risk; for those who have differentiated their value proposition not by giving things away but by delivering products or services of value that an employer would pay for. Think about that one for a second. Of all those “value added services” a firm provides, what would an employer pay for and what would they pay? Would they pay anything at all?

Much like my financial advisor I don’t have that crystal ball. And it is hard to run a business when things you don’t have any control over can cause you chaos overnight. But hoping the benefits world doesn’t change isn’t a strategy. You also can’t put your head in the sand either. Recognizing business threats is a critical component of any business. Even Apple assesses business threats. So don’t let the first benefits bear market get you down. Some good planning can reap great rewards, even when the world changes. Or maybe we will have a bull market forever. Place your bets!

Webinar Invite – Growing Your Benefits Business by Leaps and Bounds


How does a broker go from 5 employees in their benefits firm in 2005 to 60 today without an acquisition? How does another go from 5 to 200 in just 8 years? Or another that generated $40 PEPM in addition to commission on a single account?

In this webinar we will get into the details of how some firms are skyrocketing while others struggle. We will show you the details of what these firms did to generate rapid growth, and show you how you can do the same.

This is a no-holds-barred webinar. If you want me to tell you what I think you are already thinking, then this is not for you. I am going to tell it like it is.

In this webinar we will answer the following:
• What are these brokers doing that is different?
• How they generate up to $20 PEPM above the regular commission?
• Why their model sustains any changes in healthcare reform?
• What is the difference between faking it and making it?
• The 3-year plan to a better future?

This webinar is a culmination of all others we have done. It puts things in a nice neat package and explains things in a different way. If you want to learn this formula, please click here to register.

Register HERE

The dates are September 9,13,and 16th at 12 noon eastern time.

This is for benefits brokers only.

Consumerism in Healthcare is Not Practical


I read a lot of articles about consumerism and how employees need to be better consumers. And as one who implements technology I am very familiar with most of the decision support tools in the market and all the online symptom checkers. So let me make a bold statement. It is all garbage. I have always thought that individuals will never have enough knowledge to make educated health care decisions. Health care is too complex and always changing so how am I ever going to have the time to keep my knowledge current. I don’t want to, trust me. And the last time I needed health care I was driving very quickly to the emergency room. Not a lot of time the think there.

I recently listened to a presentation that Aetna CEO Mark Bertolini gave a few years ago at Stanford. (you can see it here) The final question asked of him was as follows: “How do you create a more educated consumer in a marketplace where they are being directing their own health care decisions?” What surprised me was his answer.

“Trying to educate to everybody on how the health care system works and the level of detail isn’t going to work. Sorry to say. And the reason is that unless the amount of information I can gather is immediately available and that when I act on it has an immediate response I am not going to pay attention to it.”

With all the articles out there about consumerism and directing one’s own health care I thought I was the only one that had such view.

Every time I have my car fixed I am wondering whether I am getting ripped off. I don’t know enough about cars to “shop the market” for service. I remember watching 60 minutes or one of those shows where they show auto mechanics taking advantage of everyday consumers by doing things people didn’t need. That’s me. I wish I had a trusted auto consultant who would tell me whether I really need the services some mechanic is saying I need. You get my point. If I don’t know whether my car is getting the proper treatment how the heck am I expected to figure out whether my doctor is doing the right thing.

Just last night my wife and I had a debate about the value of multivitamins and we couldn’t even agree on whether they worked or were a waste of money. So I Googled the topic, read a bunch of articles, and still don’t know whether multivitamins work.

Let’s not confuse choosing health care versus choosing health insurance. When choosing health insurance is one supposed to be predicting what their needs are going to be in the next 12 months to essentially “game the deductible”? Insurance is supposed to protect one from an unanticipated event that may cause financial duress if one were not insured. Anything that doesn’t fit into this category is simply a reimbursement plan. Dental insurance is almost not insurance. It is a prepaid reimbursement plan for most. There should be two types of insurance plans. One that runs like dental and is simply discounted reimbursements, and another that is real insurance. It is for this reason health savings accounts should rule the day.

So what is the solution? I don’t like when people run around talking about the problems without giving viable solutions so I won’t do that myself. I always say that stating the problem is easy, it is the solutions that are tough. Let me start with what I would want as a consumer. I would want someone who would give me sound advice as to what is proper treatment. I want someone who has an incentive to do the right thing for me. I want someone who would spend my money as if it were their own.

I think the solution requires properly placing incentives. I want to live a healthy, happy, long, and financially viable life. I want someone advising me who understands my goals which I will safely say that these goals are more than likely shared by many. I am all about incentives. It is funny how when you have the right incentives you get better outcomes. That requires having someone who wants me to be healthy and not just fix me when I am broke. This sounds like the things I would want from my car consultant who would advise me on how to take care of my car. I want my car to last long, be healthy, and financially viable. I am not sure what a happy car would look like.

There are emerging models out there that will provide this type of service. And making consumer based decisions around the small stuff may become common. But as a means of controlling healthcare costs, no way. We all know that the majority of health care costs come from few people with chronic conditions. If I need to have my oil changed maybe I can shop the market. But if I need a new engine I would hope to have a very educated mechanic at my side to help me make the best decisions.

Participate in our 2016 HR/Benefits/Payroll Technology and Services Survey


HR Technology Advisors is conducting our 2016 National HR Technology survey for the small to mid-sized employer market. We conducted this survey two years ago with great success and we are doing it again. Much has changed since then. This survey will help benefits brokers and employers gain an understanding of the following:

• What employers are using for technology (HR/Benefits/Payroll/Time and Attendance/ACA)
• Satisfaction levels with their vendor
• Who is looking for new solutions
• Who they are moving to and who they are moving from
• What employers are looking for from a capability standpoint
• Who is deploying employee self-service via web and mobile
• Vendors employers are using for ACA Tracking
• And more…..

With old brokers and new brokers leading with some technology solution, many giving solutions away for free, we think it would be important to:

• Know what your clients have
• Know what your clients want
• Know who is shopping
• Find out what vendors employers are really using versus listening to the sales pitches from the vendors.
• Provide your clients with valuable market information

If you are a broker and want to participate you can do so by clicking on this link. There is a fee to sponsor the survey and personalize it for your firm. Considering all the money and time brokers are spending on evaluating and paying for technology this is worth it.

If you are an employer and would like to participate send me an email or give me a call. Contact information is below. I will send you a link to take the survey. A summary of the results will be provided when we close the survey.

Participants will be eligible to win a $500 Gift Certificate.

Brokers Click HERE to Participate

Contact information: Joe Markland – 508-530-5043 jmarkland@hrtadvisors.com