Tag Archives: Employee Benefits

How well do you know your customers?

Posted on August 17, 2016 | Leave a comment

In today’s environment where information is readily available and leveraging the web and mobile to provide service is an expectation, personalizing that service is also expected. When I buy an airline ticket I am asked how I would like to be informed of any changes (email, text, phone call). When I check into my preferred hotel chain they have my preferences and personalize my service. For some reason this type of personalized service hasn’t become the standard in the benefits business, or at least to the level of other industries.

I often reference the Wellness Newsletter I got from my broker giving me tips about pre-natal care. As a 54-year-old male this is not relevant and the email itself not only did not address my needs but in some way reflects poorly on my broker. It made me think he is really not that organized. Not only was the newsletter not relevant to me, but what my broker also does not know is that I already subscribe to a Wellness Newsletter directly from another online company. This newsletter sends me the information that relates specifically to someone my gender and age and is delivered at the frequency I want in the method that I want. I did not need a Wellness Newsletter.

On another occasion a broker I know provided an online HR Library to the HR person of an employer where the outcome was not what was expected. This HR person was on a committee for a company that also provided HR content on the web and she found many flaws in the product the broker delivered. It started with good intentions, but the outcome was not what the broker intended. Should the broker have known the HR person was on such a committee?

I can go on and on. People putting in enrollment systems to clients that already owned one but didn’t know it? Building benefit websites for employers that already had a regularly used intranet. I am not just pointing the finger here at others. In my own organization we struggle with the same issues when serving our clients.

All this reminds me of some stats I saw from a book published by Jack McKean titled, “Information Masters: Secrets of the Customer Race.” In the book he cites the following:

“Only 2% of the knowledge that organizations have about their customers is actually used.”

“Only 5% of the body of knowledge about a client is available digitally and indeed only 20% of the knowledge is recorded at all.”

What is amazing is that this book was published in 1999. The stats may not be the same today but it in many cases it is close to the truth. And of course this is not reflective of you and me. We are better than this.

It takes a lot of work to create a personalized service experience. You need technology to store and manage the data. You need a methodology to gather information and keep it current. You need processes in place to automate certain functions. You need people either on staff or through an outside resource to plan and execute such a strategy. It is a herculean effort.

In today’s environment most brokers provide service to the employer which could include HR, finance or the business owner. This has its own challenges but at least gathering information to personalize the service for a few people is somewhat manageable. Imagine the effort if we move to a consumer centric world where the services need to be personalized for the employee. What is the broker’s role in this environment? What would be the cost in time, technology, and resources, to deliver the experience consumers expect in today’s world.

From the employer’s perspective they have the same challenges. The expectations of how they are going to support their employees is changing. The needs of a 26 year-old with significant college debt are much different from a middle-aged employee preparing for retirement who may have health issues. These employers may not have the resources, technology, or capital to move their HR to this new level.

Many brokers say they provide such services but I have not seen it. Many do provide great service but not in the personalized way I am talking about. Relative to their peers in the current environment they may superior. But what happens when someone comes along and raises the bar? This happens often in many industries.

As someone in the technology consulting business I am seeing firms behind the scenes beginning to develop new models of service. Models that don’t exist today in the benefits world that can raise the bar. And it can raise it in a way that gives these firms a distinct competitive advantage that is not easily duplicated. Like providing benefits advice to a millennial on a Saturday afternoon via video conferencing. Some of these firms are traditional brokers but others are coming in from outside the industry. Those outside the industry love disrupting current business models. The health care business, and by extension the benefits industry, is a primary target because the capital running through it is so high it invites disruption. People want a piece of a very large pie.

Many brokers rely on relationships and are pretty sure their clients are loyal. I once saw a statistic that said that most companies think about 80% of their clients would be loyal. When employers were asked how loyal they were to their vendors the answer was 20%. This is a huge disconnect between perception and reality. One way a relationship can be severed is when a competitor brings in a better idea or better service. Companies like Zenefits displaced $63 million in commission business from many brokers with loyal customers. One told me he lost a 20-year relationship to Zenefits. So new ideas can be powerful.

I am not going to pretend to have all the answers. And I certainly look in the mirror when writing this because I am somewhat talking to myself too. But I have seen technology and models that can start the process to personalizing service for employers and employees. I have spoken to some companies that have started the process. I have seen the revenue models too. I don’t know when this “tipping point” will happen, but it will, because it is possible and the market wants it. And the opportunity is there for those who want to provide such services, but one must start. So my advice is to start. And start today because it is a big challenge.

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Posted in Agency Operations, Employee Benefits Distribution, HR and Benefits Technology, Zenefits

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This is only the beginning for Zenefits-style brokerages

Posted on May 12, 2016 | Leave a comment

This was originally written for Employee Benefit Advisor Magazine. The original post can be seen here.

As this election year unfolds, many are questioning what created Donald Trump. Why him? Why now? On the other end of the spectrum, the same could be said of Bernie Sanders. In the benefits world, I relate this to Zenefits and former CEO Parker Conrad. What is it that allowed Zenefits to come to be? As Zenefits now re-groups to begin its post-Conrad journey, firms like Namely are getting press and stepping into the market in a similar way.

Some will say it is the Silicon Valley arrogance that breeds and often enables young entrepreneurs to create new companies and attack the market and competitors with a vengeance. These young guns want to disrupt the market and change the rules of the game to deliver something new and better.

Whether you agree with the Zenefits model or not, one can’t argue with their results. According to Bloomberg, their revenue was close to $63 million annually as of the 4th quarter 2015. This means that:

• $63 million in customers fired their broker because Zenefits promised something their current broker was not delivering.
• $63 million in customers valued what I think is the equivalent of a $5 PEPM technology more than they valued the services delivered by their $25-$35 PEPM benefit broker.
• $63 million in customers did not care that there was no local service.

While Conrad has left this stage, the conditions that allowed him to grow his business still exist. And I am sure the Zenefits executives and investors — including Andreessen Horowitz and Fidelity — aren’t going to let $63 million in revenue slip away without a fight.

What Zenefits did do is let the world know that there are many employers out there that value what Zenefits promised to deliver. In fact, according to industry analyst and marketing guru Mark Mitchell of The Starr Conspiracy, there was $2.1 billion invested in the human capital management technology and services space in 2015, and $600 million in the first quarter of 2016. As Mitchell said at a recent conference, “Those checks are being cashed.”

What is about to come is a tsunami of new products, services and marketing in the HCM technology and services areas that are going to hit the market. Employers will be getting phone calls, webinar invites and attending conferences where these new solutions will be heavily promoted.

Case in point: Had you ever seen a TV commercial or heard a radio commercial about HR technology before Zenefits and Namely? This is a hot market, and as one venture capital firm representative said to me, “We are only interested in investing in firms that go after the benefits commissions.”

The commission is in play, and $2.1 billion in investment capital knows it.
I have been in the benefit business since 1986, and many of the same problems still exist. Administration is still complex. Benefits are still confusing, and getting more confusing. Costs are still going up. And now, in today’s world, cost shifting onto employees is creating financial stress on employees. It is getting worse, not better. As long as the current market does not solve these problems, then there is an opportunity for someone else to do so.

In the political arena whether Donald Trump wins or loses somewhat does not matter. The conditions that created him and allowed him to get the nomination aren’t going away. Certainly the millions who support him won’t disappear overnight. They are still Americans living in our society.

In the benefits world whether Zenefits survives or not also doesn’t matter. The conditions that enabled them to enter the market and grow still exists. Employers still want what Zenefits promised. Managing benefits is still burdensome. Costs are still going up. People still don’t understand their health insurance. The market conditions have not changed. The opportunity for another Zenefits, or 10 of them, or 100 of them still exists. And while Parker Conrad is in the rear view mirror others are coming. And it will be a tsunami.

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Posted in Employee Benefits Distribution, HR and Benefits Technology, Zenefits

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The End of Employer-based HealthCare – An Update

Posted on April 24, 2016 | 1 comment

In this blog I wrote one of my most controversial articles in December 2014 titled, “The Coming End to the Health Insurance Business as We Know It – And What Brokers Can Do About It.” I don’t know why it caused a bit of an uproar in the benefits broker community because, for the most part, I am just telling people what others are saying. I also conducted a webinar on this topic in July of 2013 titled, “The Next Big Change in the Benefits Market That Most Brokers Aren’t Prepared For” that can be viewed from the HR Technology Advisors website here.

My article and webinar references a presentation by Mark Bertolini, CEO of Aetna, who believes the end of employer based health insurance is coming soon. In fact, he is positioning Aetna for a world where the provider systems hold most of the risk and Aetna, is essentially, no longer an insurance company in the traditional sense. I found a presentation he did for the Mayo Clinic that validates Mark’s positon. You can see it here. Every benefits broker should watch it. What Mark is saying is that health insurance is going to become a direct to consumer retail purchase. The provider systems will be the risk takers not the insurance companies. And there is a movement in Washington to eliminate the health insurance deduction at the employer level in exchange for lowering the corporate tax rate. I believe this is something Republicans and Democrats agree on.

This did play out to a certain degree in my own business. We initially got a 16% increase in our health insurance premium for April 1 of this year. My broker gave us alternatives but none saved us any money. I had to ask them to quote the local hospital system based insurance plan. Their costs came in at 17% below all others. First, I am wondering why my broker did not quote this company in the first place. Second, I wonder how traditional fee for services insurance programs are going to compete with this.

It is almost 2 years since I did my first presentation on this topic. Since that time my partner Don and I have made many changes in our business to position our firm for this change. We have hired new staff and developed new consumer-centric solutions that we think will provide value in this new benefits world. We still have work to do and the market will continue to evolve. It is a bet we are making but I think not believing the CEO of Aetna, who is now merging with Humana, is a much riskier bet.

I am surprised that few, if any, brokers have made any changes to their businesses to prepare for this new health care market. Most are unaware of the magnitude of the potential changes. I don’t look at these changes as a business threat, but an opportunity. The opportunity could be huge for those that provide some value to support this change because there will be significantly fewer competitors in the new market. The value that can be brought to market and how we will get paid is certainly up for discussion. We have ideas.

I am writing this because we are looking for broker partners willing to think outside the box, and challenge the status-quo to help build and deliver a solution that can survive and thrive in the new health care world. The power of the group can be more powerful than us individually. We are not looking for people who want to fight the change and protect the status quo. And “hoping” the world doesn’t change is not a strategy. The time is now.

According to Bertolini the train has left the station. It is not if, it is when the market will change. The financial viability of America is dependent on radical changes to the delivery and cost of health care. This is not just one company, Aetna, trying to impose their view of the world on others. They are taking real action. There are a real lot of highly motivated people who are working to do the same. We can be part of the solution or hope this does not happen. Join us on this exciting journey to be part of something that will change health care in America forever.

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Insurance Education is Poor and on the Wrong Path

Posted on April 19, 2016 | Leave a comment

I have 6 brothers so when I reference a brother in a blog it is not always the same one. A few weeks back one of my brothers was telling me how he thought his car insurance was a rip-off. He said he is always paying for it and never had a claim. So I said, “well, why don’t you take your car and drive it into a tree and then you will get your money’s worth”. Insurance gets a bad rap. However, I think it is the industry in general that does a poor job developing products, educating consumers, and clearly stating their value proposition.

One of the reasons insurance gets a bad rap is that nobody really understands it. Another is that while the majority pay the minority get some form of payment in excess of what they paid in. Insurance, for the most part, is about having peace of mind. I try to tell my brother, imagine driving a brand new car through Manhattan or in the snow with no insurance. You would be very cautious. If your car was very used then maybe you wouldn’t care, but with a new car it would be different. It is knowing you have insurance that makes it easier to navigate tough situations.

Insurance It is not intended to be perceived as some form of savings plan or reimbursement policy. Insurance is designed to protect someone from an unanticipated event that can cause significant financial loss and harm. This also has been lost on the market and in the narrative. Since when should an office visit be considered an insurable event? People spend more money on Starbucks in the morning or going to the movies or out to dinner on weekends than they do on health insurance out of pocket costs. And what is the average monthly cell phone bill for a family?

Most people also don’t understand how insurance is priced. In fact, one of the major problems with health insurance is that it is essentially a one-year term policy. Medical insurance should give people options like Life Insurance so they can see the costs over their lifetime. If I buy an annual renewable term policy I would see how the costs go up every year as I get older. However, if I bought a 30-year level term I would see that while I pay more when I am young relative to a one year -term, I am paying less as I get older. I understand rates would need to be adjusted for inflation. But people don’t understand this. They need to understand their costs over time to realize why you have to pay more when you are younger. I thought one of the biggest mistakes of Obamacare is the age rating. It is started this division between old and young. “Why should I pay for the old guys?”

People also think the government will take care of things if you don’t have insurance, or you can go to a hospital and get treatment without having to pay. With disability many think the government will step-in. That belief of a safety net makes it too easy to take chances. I know so many people on social security disability it is unbelievable. And I know they can work. It seems too easy.

So what are my solutions? First, make a law that says health care costs are not exempt from bankruptcy. If that is the case, then every parent will be telling their child to not take the chance of ruining their financial lives by not buying insurance. Every financial planner would make buying health insurance a priority. Second, health saving accounts should be available to everyone but, there should be no laws requiring the covering of expenses less than say $1000 or $2000. If ever person who turned 22 saved $50 every month for the rest of their working lives in a health savings account this would total $14,000 before any interest. Most would have enough money to cover those smaller expense for a lifetime. And don’t tell me they can’t save $50. As long as I see people walking around with cell phones I believe this can be done.

I know this blog is a little bit of a rant. I actually don’t think health insurance will be fixed without dramatic changes. I shared my opinions on how it will be fixed in other blogs. However, I also think the current narrative from the government, from insurance companies, from employers, and yes, from many brokers, is not contributing to the education of what insurance is really about. The system, in its current design, is not on a path to make things better. And I am not talking about costs. The current narrative is not educating people or giving them an understanding of what insurance is about or how much it costs. The current narrative says, don’t worry, we will take care of you.

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Two health care stories – Which do you believe?

Posted on April 4, 2016 | 4 comments

As a way to keep my knowledge of the benefits business current, I read many articles, attend seminars, webinars, and industry conferences, and read all the press releases and announcements. My Google Alerts sends me the news I want every day. One major area of interest is how the market is addressing the rising cost of health care. As I had written in a recent blog my company just got a 16% increase and I think we are reaching the tipping point. I am looking for the business models that can control the cost of health care.

What I have discovered is that there are two different narratives playing out in the market. One narrative represents around 95% of all the “noise” and the other just 5%. The 95%er’s consume the publications and have speaking engagements at all the conferences. They put out press releases almost daily and make wild claims as to how their businesses are growing. Yet I find myself believing the 5%er’s. Their message appeals to my logic and understanding of the business. I think there is hope that health care costs will come under control. However, their message is getting drowned out by the noise created by the 95%er’s which could lead to a false perception of where the health care market is going.

In sports there is a saying that “practice makes perfect”. Well that works if you are practicing the right things. If you practice doing something the wrong way you will master the wrong way. In this healthcare debate, discussion, or whatever you want to call it, if you spend your time listening to and believing the pretenders version of where they think the health care business is going you may actually change your business and start practicing the wrong thing. Who you listen to or believe may matter.

There is a better more believable story developing. One that has a chance of controlling health care costs. One that properly places incentives so that providing better care while reducing costs is rewarded. One that as a consumer myself I would find as a more attractive model than most of the current health insurance/health care models.

When people ask me what I think. I don’t sugarcoat things I simply say “I think it is a bad idea.” Don’t waste your time. Often they don’t want to hear this if they have an agenda. So here is what I think.

• Private Exchanges – Bad idea – 30-year old idea – that does not control health care costs.
• Self-insured for smaller and smaller groups – squeezes the balloon – temporary solution that does not control costs.
• Wellness Programs – Nice try – won’t control costs – may make people feel better – could improve productivity.
• Wellness Programs where you charge employees more who don’t take biometric tests – bad idea – employees will rebel. They should rebel.
• HSA’s – Needed but don’t not control costs.
• Large employers collaborating to negotiate with providers – Why? Is this what employers should be doing? Another squeezing of the balloon. What about the rest of us?
• Decision Support Tools – Help you choose the best high cost product that will continue to go up.
• Captives – Simply another risk pool where costs will still go up, up, up in time.
• ObamaCare – A joke. More cost shifting in the end. That’s why my costs went up 16%, again.

All these tactics simply squeeze the balloon. You can push the numbers around but the numbers only get bigger not smaller. Anyone who understands medical underwriting or actuary knows this is the case.

So who should you be listening to? Aetna and their CEO Mark Bertolini; Kaiser; Partners Healthcare; Intermountain Healthcare; University of Pittsburg Medical Center; Evolent Health; Apple. I am sure there are many more. These firms are painting a much different picture of the future of healthcare in America. However, I don’t see them at benefits conferences. They don’t publish in benefits magazines. They don’t make grand claims of having some new invention. They are simply trying to figure out a way to improve the health care system in America. What they have in common is they see getting the providers in the risk business as the solution. This moves the risk from employers and traditional insurers to the providers. They may not all be perfect but they are trying to bend the cost curve.

These two narratives are playing out. One continues to promote fee for service. The other promotes capitation to a much larger degree. I don’t know who will win in the end, because these stories are still being told. But I know what makes sense to me.

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Posted in Agency Operations, Employee Benefits Distribution, Private Exchanges

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I Got a 16 % Health Insurance Increase – This is Not Sustainable

Posted on March 12, 2016 | 3 comments

Only 30 days in advance of my April 1st renewal date I got an email informing me that my company’s medical insurance rates are increasing 16%. For a $2000 deductible plan (we do have a HRA underneath) it now costs $20,736 per year for family health insurance coverage. For an employee making $40,000 per year this is 50% of this employee’s payroll cost. If I asked this person to pay for 100% of the increase this would be equal to a pay-cut of 7.35%. This is not sustainable. What is worse is that I have so little control over the cost and I see very few companies really trying to do anything about it.

I have mentioned in previous articles how the two biggest problems the U.S. is facing economically is the cost of healthcare and college education. I get the double whammy as a business owner who pays for 75% of my employee’s healthcare and as the father with two kids in college. I can’t win. “Thank you, sir, may I have another?” (Animal House 1978)

Between the cost of healthcare and college something has to give. Personally I think we are reaching the breaking point for employers and employees. What can be done? Do I not hire people who need health insurance? Do I hire only young people that have lowers costs? Do I start hiring all part-time people? Do I move my business to a lower cost State? Do I outsource some things overseas? One thing I know is that a business owner will do what he/she needs to do to survive so all these tactics will be used. I have always been a believer that if you show me a law or rule I can predict how people will react. You increase the cost of health care on a business and I can tell you what you will get.

I have been in or around the health insurance business since 1986. I delivered my first medical renewal with an employee rate that exceeded $100 for an employee in that year. In fact, I remember the exact client meeting like it was yesterday because the business owner’s father was dying of cancer and now I was delivering more “stress”. He was angry. I am angry too.

I am mad because this problem has gone on long enough and the industry has really done nothing about it. I am mad because I will probably have to switch insurance companies again for the 6th time in 15 years. It is inconvenient. It is stupid. I have had the same doctor for 15 years but my insurer has to change every 2-3 years. What a waste. I am mad because I will have to deliver bad news to employees and then wonder if any of my employees will start looking for a job with a company that pays more for health insurance. It is a business risk.

Here is my message to the industry. Fix it. Or someone else will. And I am no longer going to take it anymore. I am sure many others feel the same way.

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Posted in Employee Benefits Distribution, HR and Benefits Technology

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Simply a Better HR and Benefits World

Posted on February 11, 2016 | 1 comment

Those who read my blogs and some of the publications that I write for know when news such as Zenefits firing their CEO hits the street I am more than likely going to have an opinion. In fact, I get calls all the time to comment on the news of the day. I guess I am as qualified as anyone to comment but all this writing I do and the webinars I conduct sometimes obscures one’s perception of what my real mission is. My “Why” has been consistent since February of 2001 when, while on the beach in Jamaica, I found out that our investors were not going to fund the needed next round of capital for our business and I had to sell the assets and find a new job. My mission that started that day continues today.

What I don’t want is to have outsiders define me or the mission of the company my partner Don Rowe have built. Just today I had one broker comment that I am telling everyone that brokers are going out of business. I don’t think that at all. In fact, I wrote an article on this blog titled, The Demise of Small and Mid-sized Benefits Brokers is Greatly Exaggerated . What I do believe is that if brokers don’t change with the times they will lose to brokers who do change or are more creative. Like any industry there will be some companies that go out of business. Capitalism rewards those that provide more value and create new things. It is responsible for innovation.

So what is driving me? As someone who understands insurance, understands the technology business, and is an employer myself, I simply think that there is a much better way to deliver and manage HR and Benefits. The problem, and I guess opportunity, is that the current structure of our delivery system is not really designed to make the changes that are possible. Some simply are protecting the status quo while others simply don’t have the capacity or maybe the vision to enact change. Heck, I may not either, but I am going to try.

I will say one of the frustrating parts is when people try to protect the status quo. I don’t think those in the industry have done enough to impact change. Maybe that is why the government got into the middle of health insurance and why firms like Zenefits pop-up. Therefore, when some change comes from an outsider that I think has a good idea I applaud it. When people try to protect the statuus quo I think they are part of the problem and not the solution.

I think the idea of Zenefits is a good idea. As a small employer their value proposition is strong. Does that mean I think they are a great company or think their founder is a great guy? No! Would I move my business to a company that made the management of my HR/Benefits/Payroll easier for me and my employees? Sure I would. Not to Zenefits but someone who did what Zenefits is promising well. Maybe it is Namely or Gusto. In fact, I have told people I would pay someone pretty good money if they provided more help in the HR/Benefits/Payroll areas. I really could use PEO like services. I only had two companies ever call me and offer to help me in this area and that is Zenefits and Paychex.

I think Fidelity entering the benefits business is a good idea too. I think that my employees should have a single place to call if they have a question about their 401K or benefits. I think that there is a relationship between which medical plan I should choose and how much I am contributing to my 401K. These decisions are related. So if Fidelity delivers a single point of contact for my employees then that would be progress. Nobody has ever offered that to my company.

When I see bad ideas I call them out too. Private Exchanges are a somewhat of a farce. The idea of giving employees more options is not a bad idea but the promise that this is real change is a joke. I sold cafeteria plans in 1987 which look like today’s private exchanges. Boy have we come a long way since 1987.

Most Wellness programs are pretty bad too. Many of these programs alienate people, probably lead to discrimination, and don’t save 10 cents in health care costs. Plus, I would not want my employer ever putting their nose in my personal business. This is getting out of hand and I think it will create friction between employers and employees. Does that mean all wellness programs are bad? No. If they make people feel better, improve productivity, or maybe build morale then that is fine. There are too many negatives in the corporate wellness programs.

I think benefits are too confusing too. Nobody understands their benefits yet nobody tries to make things easier. If I read another article about Benefits Communication I will die. I feel like yelling very loudly –  STOP MAKING HEALTH INSURANCE SO CONFUSING. Who is going to stand up and make things easier? You know who will? Apple.

The HR and Benefits world that I envision looks much different than today. As an employer I want things to be easy. I really don’t want the stress of going through a medical renewal every year. I want my employees to access information easy, on the web, at home, and on their cell phone. I want productive, happy, and engaged employees so if they are stressed financially, physically, or mentally, I would love to give them a place to call or go to get help. I don’t want my business to be at risk either. There are so many rules and laws I simply don’t know what I don’t know. I want someone I can depend on to give me good advice. I don’t want to work this hard to build a business only to have it blow up because I did something wrong that I wasn’t even aware of. I want people paid the right way. I want to record time-off the right way. I want all my benefits bills to be right and my payroll deductions to be accurate. All this stuff does not move my business forward a bit but needs to get done. Make it easy and get it out of my way.

As an employee I want health insurance that makes sense. I want my doctor to care if I am healthy or living the right way and not my employer. I would like to talk to a doctor at 1 in the morning via my cell phone when my son has an ear infection. Why do I have to go to the emergency room just to get a prescription? I always wonder why Jiffy Lube can send me an email when my car is due for an oil change but I don’t get an email from my doctor that I am due for a check-up or some other test. I would want to know how many vacation days I have left so when I am planning my vacation on a Sunday night with my wife I could look it up. I want to know the company holidays and how much time I get off if a relative died. I want to easily access my pay-stub if I want to apply for a loan. I want to have the balance of my FSA, HSA, and 401K on my cell phone. I want all this stuff in one place with one log-in, one app on my cell phone, and with one 800 number to call if I have a question. I have enough passwords in my life already so please don’t give me too many more. I already have my Excel file with my passwords list and I forgot where I put that.

And as an employer and employee I want my health insurance to stop going up 5%-10% per year. That is a dream.

In many other aspects of our lives things are getting easier. Paying my bills; managing my money and banking; communicating with my kids and my elderly parents; buying airline tickets; reserving hotels; avoiding speeding tickets (Waze App); I can go on and on. Yet, while everything I listed for above employers is available and possible today, few have achieved even a fraction of what is possible. Why is that? Why is it that people are selling “Private Exchanges” as something new when I was selling them in 1987?

Is it inertia? Is it people protecting the status quo? We are in an age where if those in any industry don’t make things better opportunist from the outside will. Trust me, people like me are thinking this way every day. Zenefits, Namely, Gusto, and Fidelity are going to try. Tomorrow it may be Google or Apple. Sounds crazy doesn’t it. Well I am not waiting.  The change I am talking about is going to be tough. It is going to take “out-of-the- box” thinking. It could take significant capital. It will require scale and resources. It may require one to blow up their own business model to move it to a better place. As the old saying goes, “if it were easy everyone would do it.” It will be tough but my partner and I are going to try. We think it will be fun too. Join us!

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Fidelity Enters the Benefits Business – Why Many Others Will Follow

Posted on January 27, 2016 | 1 comment

You may have seen the press release announcing that Fidelity has entered the benefits business as a broker. According to the Boston Globe “Fidelity will act as a broker, selling the plans of traditional insurance providers and competing against hundreds of other agents and brokers for that business.” Fidelity has been in business since 1946. Most know them as an investment company and 401k administrator but fewer know that they are also a benefits outsourcing firm and even have payroll services. Yet, in spite of being in these businesses for years, they decided to get into the benefits business now. One has to wonder, why now? And after Fidelity, who is next?

If you are a benefits broker this is big news but should also be viewed as another “shot across the bow” sending a signal to the market that this is not business as usual. First we have Zenefits – now Fidelity. Though these companies are very different and entered the brokerage business from different market positions and with different value propositions, I believe the market conditions driving them into the business are somewhat similar. So what are these conditions.

Employer desire to simplify. Employers are getting overwhelmed with technology, new laws, new benefits, and a changing workforce. They are looking for simpler solutions from fewer vendors. Both Zenefits and Fidelity are promising simplicity by combining things that have been delivered in silos in the past.

Demand for more and better outsourced services. Employers will be looking to outsource more services, especially in the SMB market, as the HR world gets more complex. Zenefits says just enter your new employee data and “we will get them on benefits. We will get them on payroll.” Fidelity already provides a broad range of HR, Benefits, and Payroll services and is now adding more.

Advance of Defined Contribution Plans (aka Private Exchanges) –We have all seen the articles on Private Exchanges. Fidelity has already developed the service infrastructure to support employees who are already making financial decisions with more options (401K). If I am an employee and now have five medical options will I have a place to call if I need some help to decide which of the five I should pick? Fidelity has the tools and the call centers to provide these services.

Financial Wellness in the Workplace – According to some statistics up to 40% of employees lose productivity at work due to financial stress. With defined contribution plans employees are given even more options often creating more stress. And we all know there is a lot of cost shifting onto the employee going on. The problem with such plans is they are too narrow in their scope. Most decision support tools take into consideration employee benefit decisions but leave out other parts of an employee’s financial life. Isn’t there a relationship between the medical plan deductible I should choose and whether or not I maximized my 401K contribution? Should I buy more Life Insurance or should I have a 6-month cash reserve first? In most peoples lives the type of car they drive is somewhat related to how big their mortgage is. You get the picture. Things that should be related are presently disconnected in the typical benefits model. Fidelity, by combining financial counseling or decisions with other benefits decisions delivers a more holistic approach to the decision process thus creating a higher probability of a better outcome for the employee. For the employer this employee may be more productive. Joe Laurin, who runs the health marketplace business at Fidelity, said in a telephone interview. “The real distinguishing point is this ability to bring the health and financial wellness together.” (Bloomberg)

The Broker Commission is in Play

One of the problems in the market is the employers are looking for simpler solutions, better technology, with “white glove” outsourced services, but they often don’t have the budgets. Zenefits has shown that the market is willing to change their broker to get these products or services. The benefits commission is in play and the whole market knows it. You won’t read this in any press release and most likely not from any Fidelity representative but this is a market reality that few talk about. That is of course, other than Parker Conrad, CEO of Zenefits, that will talk about it all day.

So Zenefits, Namely, Gusto and now Fidelity enter benefits brokerage business. They are not alone. I know local payroll companies and HR consultants that have gotten into the business too without the fanfare of these bigger firms. Why? Because benefits brokers compensation ranges from $25 – $50 PEPM while Payroll companies get $7-$10 PEPM – HR Tech Companies $5 – $8 – Benefits outsourcing firms – $7 – $14 PEPM – and HR Consultants fight for $150 – $200 per hour. I hear employers, and many times their brokers, complain about the service from their payroll company. I can guarantee you this, if they made $35 PEPM versus $8 PEPM their service would be much better. The reality of the market is that many employers will see a reallocation of their HR spend from their benefits broker to other service providers as a way to fund the technology and white glove outsourced services they desire. And if they don’t know they can do this someone will point it out.

What can other brokers do?

I have read many articles about how brokers need to “sell their value”. Value is not only a function of the product/service that the broker is providing but also includes the price for that service. This is the elephant in the room that nobody wants to discuss. How can one discuss value without price? I like the kid who plows my driveway. He even gets out of his truck and snow-blows places his plow can’t get to. But I also like that he charges me $40. If he charged $100 he would still be a great snow-plower. He just wouldn’t be mine.

These other vendors that provide products and services that are now in greater demand think what they offer is of great value too. Nobody is questioning whether the benefits broker delivers a valuable service. What is in play, and people are now challenging, is the price for that service. This is the real catalyst that will continue drive companies into the benefits business. To compete, traditional brokers will either need to sell their “value” with their price on the table relative to what these new entrants are providing, or start providing some of these new products and services that seem to be in greater demand. Think about a call center on nights and weekends. Brokers will want to silo off the benefits brokerage service but these other vendors are going to make every effort to no longer let that happen. The only thing that will slow this down would be a total market move to fee for service.

Fidelity is the tip of the iceberg. More press releases from companies that provide some solution in the HR, Benefits Payroll technology or services space will be coming in droves. Zenefits made noise. They are new and interesting. Fidelity is a whole new ballgame. All the comments about Zenefits can’t be applied to Fidelity. Zenefits was version 1. Most brokers are hoping they would go away. But what usually comes after version 1 is version 2. And version 2 is better. Now we have Fidelity – and things will get better.

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

Posted on November 12, 2015 | Leave a comment

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.

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

Posted on November 4, 2015 | 1 comment

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Conclusion

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

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