Tag Archives: HCM

It’s Time to Turn Health Insurance Around

Posted on July 1, 2019 | 1 comment

When employer paid health insurance became a tax-deductible expense in the 1940’s employers jumped in with the idea of providing employees a different type of compensation to attract and retain talent. I would bet they could not have imagined the health insurance world of today where the cost of health insurance significantly impacts profitability and employers are forced to deal with managing the health of their employees. The reaction of the industry insiders over the past 20 or so years, but even more so since the passage of Obamacare, has been to push employers even more into the path of this health care cyclone by having them take on even more risk and responsibility. Many have joined coalitions to perpetuate this misguided trend. I would contend that the reason for skyrocketing costs is the perpetuation of employer-based health insurance promoted by interested industry insiders. I say it is time to turn this trend around. It is time to move the risk and responsibility away from employers and onto where it belongs, which is the health care system and the patients.

I have written in previous articles that the two major financial frauds in the U.S. that are causing financial harm to millions of people are the costs health care and college education. In both cases, third-party payors fund the costs (often temporarily and indirectly) and the insiders have no incentive to stop the cost escalation. In both cases it is the system that drives costs up because there are few built-in incentives to control costs. And even those that try to control costs may be doing so with good intentions, but most continue to support the “system” that is designed to protect the status quo and drive costs up.

In the health insurance business, for the past 25 years we have seen many efforts to control health care cost. From HMO’s to PPO’s, claims management and prescription drug programs, wellness programs, and other incentives to modify employee behavior, have all failed. Over the past few years we have seen the proliferation of efforts to try to control costs by shifting more risk and responsibility to the employers who have often then pushed more risk onto the employee. Smaller and smaller firms have turned to self-funded plans. Deductibles have risen significantly for the employee. Many consultants have been promoting referenced-based pricing policies, that I think are “desperation” only policies. All these programs shift the risk and responsibility towards the employer and employee.

The insurance companies have also been shifting risk. They are using claims experience on smaller groups to adjust pricing when there is no statistically valid reason to do so. They “laser” underwrite, which means if a group comes up with a big claim and can’t move their insurance, they get a big rate increase and are told, “well, you have a large claim”. For self-funded employers they may change the insurance limits for that one claimant. This is not insurance.
Employer-based insurance policies are one-year term policies, meaning rates are adjusted annually for a period of one-year. Most small businesses can’t afford to assume the risk of a large claim and the increased premiums related to that claim, which is why they buy insurance in the first place. A one-year term policy for a group health insurance program is simply a flawed concept. Health insurance needs to be priced over a longer term like other high-risk types of insurance.

There are many benefits consultants pushing employers more into the health risk and responsibility business. They say, “you are in the health insurance business, get over it”. I contend that employers want out. Business owners don’t start businesses to be in the health insurance business. They don’t come to work wanting to control their health care costs. I say it is impossible anyway. There may be some stories of short-term success here and there but for the most part, they don’t want to be doing this and they shouldn’t be. The health of one’s employees should not be the risk or responsibility of an employer. They can care about an employee but not assume the risk. And then they hire an employee whose spouse is pregnant with triplets. As Mark Bertolini, ex-CEO of Aetna, said when asked at Stanford, “how do you create a more educated consumer…so they utilize the system appropriately”. He responded as follows, “trying to educate everybody on how the health care system works and the level of detail isn’t going to work”. The idea that employers and employees can manage health care and health care costs is a far-fetched idea. Ask anyone being rushed to a hospital in the back of an ambulance what they are thinking at that time.

The good news is that there is a whole new health insurance and health care system that is evolving that will turn things in the right direction. One of the catalysts to this change is the recent Executive Order by President Trump that will allow an individual insurance purchase through an employer-sponsored Health Reimbursement Account. This one change will remove the handcuffs from a system that needs to move the risk and responsibility into the right hands from the employer and insurance companies to the consumer and providers of health care. Health care will become more personal and less expensive. Health care will be more about keeping people healthy rather than fixing them after they are ill.

When imagining a new health insurance and health care system one needs to remove today’s version from one’s mind. The new system will be much different from today. Who employees buy their insurance from will be different. No more one-size fits all from employers. The types of plans will be different. No more PPO’s. Imagine no deductibles or copays and no paperwork. No more annual 10% increases in health care costs for employers or employees. Imagine knowing about an emerging health condition before it happens.

The time to change is now. Employers need to rethink the way they view health insurance in their organizations. They need to engage consultants who don’t support the status quo, which is the current system. It is time to turn health care around, so let’s be part of the solution.

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Posted in Employer HR, Health Care, HR and Benefits Technology

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When Things Don’t Make Sense – Prepare for a Change

Posted on February 21, 2018 | Leave a comment

I was out having a beer after work a few weeks ago with a few friends when a woman across the bar started telling everyone how her son just made $500 selling Bit Coin. The first thing I thought was 2008, when the housing market tanked. When things just don’t make sense, there is big change coming and with it may come a lot of pain. In the movie the Big Short they found waitresses in Florida owning 5 houses when they had little income. Back then I remember thinking, “how can housing prices continue to rise at this crazy pace.” Like most others, I did nothing, and would never have imagined things were as screwed up as they were. Whether it be Bit Coin, Housing, or the Tech Bubble of the late 90’s, it seems like these Ponzi schemes with a product are not going away. In the industry I play around in, the health insurance business, is going through this now. Things don’t make sense. Change will come.

A few other things don’t make sense which is a sign of the times. My daughter is spending her semester of college in Barcelona. It will cost me less to have her study a semester in Barcelona and travel throughout Europe than have her study at the University of New Hampshire, where she will graduate next year. It doesn’t make sense. High college costs need to end. Nobody seems to care.

I saw a medical plan the other day that an employer was providing that had a $6800 deductible. That is not insurance in a country where 70% of the population is living paycheck to paycheck. The system is broken. It must change.

This same health care system has people getting on planes in our version of Domestic Medical Tourism to have surgeries in lower cost areas across the U.S. This is just plain stupid. How do you move populations of people all over the place to get health care when they would prefer it closer to their homes where friends and family can support them? I wonder how this idea can support the 6.5 million people in the Boston area. Are they going to get on planes and fly to Kansas? When you see something real dumb, change is on the horizon.

I would add that my medical insurance premium renewal was +29% this year. This was after +16% last year. It goes on and on. Then it will crash, and it should. Unfortunately, until then, our health insurance will continue to cause pain. And please, don’t tell me how you saved someone money by putting them in a captive with medical tourism, some new RX plan, and a personal direct primary care physician. All are symptoms of the problem. Aetna and CVS get this. They are trying to change this. Most perpetuate the insanity.

In the health insurance industry, we have seen private exchanges, then captives, now the buzz is referenced based pricing, domestic medical tourism, and direct primary care. For someone who has been in the business for 20+ years all of these seem like old ideas rebranded as something new. Some see this as change. I see all this as symptoms of a bigger problem. These trends will come and go. They may hide the problem for a while or simply push the problem forward a few years. But it doesn’t make sense. So, things will change.

Let 2018 be the year where we start tackling some tough problems. Health care costs, college debt, market bubbles that create havoc, Ponzi schemes with products, are all things lurking behind the scenes that for some reason most of us are blind to. Others we see yet push to tomorrow. The bubbles continue to grow. Tomorrow will come. Look around, if it doesn’t make sense, it should change. We can continue to ride on this rollercoaster of steep ups and steep downs or choose to do something about it. Let’s start.

I am starting by writing my book about how to fix health care in America. I think I have a good solution. I may never finish it, or I may be the only one to read it, but I am going to try. Maybe after that I will tackle the high costs of college. My kids will be out by then, but the madness needs to stop.

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Posted in Employee Benefits Distribution, Health Care, Private Exchanges

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The Health Care Solution Can Be Found in the Dunkin Donuts Drive-thru

Posted on October 12, 2017 | Leave a comment

Almost every morning on the way to work I go through the Dunkin Donuts drive-thru and get a large coffee. On an average day there are two or three cars in line. If it is a school day and my timing is off there may be 4-5 cars in line. But every now and then there are 10-15 cars in line. The first time I saw the big line I thought they were short-handed. However, when I pulled up to the drive thru speaker and ordered my large coffee I was asked what kind of free donut I wanted with that. Yes, it was buy a large coffee and get a free donut day. My first thought was that I needed to lose fifteen pounds and don’t need the donut. My second though was that I could not believe how many people changed their morning routine to get a free high calorie food item that costs $1.20 because they purchased a coffee. As a psychology major I came to the simple realization that this is real human behavior in action.

This gets me to what I have always believed about the U.S. health insurance and health care market. I believe that the major obstacle to achieving significantly lower costs are laws and rules that prohibit normal and instinctive human behavior. If we simply unleashed the power of an individual to act in their own self-interest as they do to get a free donut, the entire market would react to meet the demand that this behavior created. Costs would drop like a rock as insurance companies, doctors, hospitals, and drug companies restructured their businesses to accommodate this new buyer. These lower costs would also free-up needed capital to cover those that need a safety net.

Most can’t imagine this new world because their minds are stuck in the current model. The new models would be very different. Maybe insurance products would not be as complex. I often reference how Steve Jobs was a uability fanatic. He cared about the fonts on the cell phone. If the iPhone wasn’t easy nobody would use it. Apply the same logic to health insurance. Would some company design an easy to understand product? I always make fun of a prescription drug plan that I saw that had 12 different ways to get reimbursed for a prescription. Does anyone really understand what a non-formulary non-network drug is?

A few years ago, I read that 87% of employees had one health insurance option through their employer. That may be a little higher today but still a low number. With almost every other product I purchase I have dozens of options. Dunkin Donuts has 20+ donut options. The local ice cream place has 30 flavors and that is just one place. How many different cars can I buy? A buddy of mine owns a vodka business. How many types of vodka or beers are there? Yet with health insurance I have one option and the price is going up 15% every year. Maybe there is a relationship between these two stats.

I read all these articles by brokers and others about working with employers to try and control health care costs. In my opinion, while it is necessary in today’s world, it is all garbage. It is a temporary fix. I know this may be blasphemous to say such things in the world that I travel but I really don’t think employers want to be going to work and worrying about how to control the claims of their employees. I often say that the best way to control costs is to not hire old fat people. The current market does promote that type of discrimination.

The two areas in then U.S. where there is easy access to capital are in health care and college education. These are also the two areas where costs are exceeding inflation by a mile and are the biggest burdens on our society. In health care employers pay a large part of the premium taking the obligation away from the individual. In education the student loan programs give loans in the hundreds of thousands of dollars to young people who have no job, no credit, and have no idea what $150,000 in debt really feels like. The solution to both is to change the incentives to drive down costs. It seems so simple that I really can’t understand what is preventing this from happening. If a free donut can change human behavior in this way then why not try it in health care and education. I bet it would work.

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Posted in Employer HR, Health Care, HR and Benefits Technology

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Redefining Employee Benefits

Posted on September 27, 2017 | 1 comment

When it comes to the benefits brokering business you get people or companies labeling themselves in many different ways. When I started in the business the common title was a Group Insurance Broker. Some added the label “Consultant”. Over time the term changed to Employee Benefits Advisor or Employee Benefits Consultant. I guess in the end you can call yourself whatever you want but the market really doesn’t care. What an employee values as a “Benefit” to working at some employer is something that is personal to that individual. The consumer or customer, or in this case an employee, will determine for themselves what is a benefit and what is not. Even the employer may be offering “benefits” that their employees don’t value much as a benefit to working there.

I think we are in the middle of a redefinition of what Employee Benefits is. A 23-year-old entering the workforce with a ton of college debt more than likely does not view a health insurance plan with a $3000 deductible as much of a benefit. Most don’t see themselves incurring claims over $3000, and if they did, they don’t have the $3000 in the bank to pay the deductible. My son is that 23-year-old and that is what he and his friends told me when I asked them. Granted, this is not a large sample size.

Mark Bertolini, CEO of Aetna, who has implemented some of the most progressive employee benefits programs for their employees says, their goal is to help employees be “happy, healthy, and economically viable”. Not a bad objective, and I would assume this would help their employees be more productive. I think most people strive to be happy, or at least happier, so helping people be a little happier is a worthy goal.

When a 25-year-old single mother with no money in the bank has her refrigerator break down that is a bad day. When a 40-year-old has their spouse ask for a divorce unexpectedly that is a bad day too. And when your 87-year-old father has dementia and needs to be put in a nursing facility that is a bad day for you and your 89-year-old mother who is slowly losing her partner. These bad days suck the happiness out of most people and this almost always leads to lost productivity at work, at home, or almost at any endeavor. It is hard to stay focused when something else consumes you.

This emerging market demand to help people through their workplace has resulted in a significant amount of capital being invested in new companies providing products and services to fill the need. These solutions include wellness, nutrition and smoking cessation programs, financial fitness, college loan payment support, employee loan programs, help with bad credit, and more. At Aetna, they promote yoga and pay employees to sleep more in additional to many other programs. Aetna claims that these programs have saved them millions of dollars through improved employee productivity and a reduction in sick days. This is certainly a different employee benefits world.

For employers, the idea of providing a benefit to employees should be a good thing. Who doesn’t want healthy, happy, financially viable, and productive employees? For many though, the number one employee benefit, health insurance, has become a necessary evil that still leaves employees with a financial burden. And what employer wants to come to work and worry about managing the health claims of their employees to keep down costs and maintain profitability? You would think they already have enough to do running whatever business they are in. In addition, they are essentially delivering “bad news” once per year when they raise employee contributions. This change has made health insurance much less of a benefit. And many people believe that it is rising health care costs that is holding back salary increases. So, indirectly, employees are really paying for the health insurance through lower incomes.

As these “new benefits” enter the market there are challenges. Employers aren’t sitting there with the budgets to provide all these solutions. HR departments, that are already strapped for time, don’t have the capacity to evaluate, purchase, communicate, and administer such programs. And many programs only address a subset of a population. A 48-year-old overweight diabetic has different needs than a 23-year-old triathlete with no money who just crashed his car. Meeting the needs of a broad employee population is not easy. While today these may be new ideas, there may be a day in the near future when this will be an expectation of employers.

Helping employers meet the needs of this changing market is an opportunity that can also be exciting. The idea of helping someone have a “better day” because you provide an outlet for an individual that has some immediate need, can be rewarding. But, as stated above, this is not easy. As the definition of employee benefits is redefined, it may also redefine what people call themselves who serve this market. It may start separating the traditional Group Insurance Broker/Consultant from those providing redefined Employee Benefits Consulting. Those lines are blurry today. They may not be in the near future.

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

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What is the Speed of Your Benefits Business

Posted on July 31, 2017 | 1 comment

I often wonder why the benefits world is so slow to advance new ideas and new technology. I have been in the business for over 30 years yet have seen very little evolution relative to other industries. In my personal life, almost everything has evolved. The way I do my banking, communicate with friends and businesses associates, book an airline ticket, turn lights on and off in my home, pay at Starbucks, or get around a city, have all changed. Things are easier. Yet, for the most part, the benefits business is almost still the same as it was when I got in the business in 1986. Up to this point lack of change has not significantly impacted those in the business. I think that is about to change.

I started my career in finance at General Electric where the CEO, Jack Welch, was good at putting things in perspective. One quote has stuck with me and that is as follows:

“If the rate of change on the outside exceeds the rate of change on the inside, then the end is near.”                                  Jack Welch

Since I have been running a business I have heeded that advice. We try hard to change with the times and it isn’t always easy. I would say it is never easy. But we haven’t sat still.

With all the attention to health care and health insurance in the U.S. I have spent a great deal of time researching the market so that I can make an educated guess as to where the market is headed. What I have seen is that the outside world, (outside of the current benefits market including carriers, brokers, TPA’s etc..) is moving much faster than the inside world. If you only looked on the inside; at broker and carrier conferences; read benefits magazines or blogs; or listen to one’s buddy in the business; you would miss what is going on outside. The outsiders don’t care about the insiders. Unlike the past 30 years, new technologies, new business models, significant capital, a populace looking for better solutions, and government debt that is unsustainable, are the catalysts for change that exist today and not at any time in the past. Things are different.

A changing health care market is right under everyone’s nose yet many don’t see it. The Apple Watch, an Amazon Echo, Bitcoin and Blockchain technology, Artificial Intelligence and machine learning (highlighted on 60 minutes) all can be the foundation for huge changes. Never mind simple things like video conferencing, online chat and text messaging, and bots.

A few years ago, some benefits organizations started pushing Private Exchanges as some new idea. I wasn’t buying it. I sold similar plans in 1987. Many think they are offering some game changing idea, but most are simply different packaging of the same thing.

In the benefits business, small brokers may not have the capital to make the changes needed to keep up with the outside world. Many larger firms appear to be building moats around their businesses hoping the outside world won’t touch them. And as the old saying goes, it takes a long time for a big ship to change its course. The outsiders will just go around or over the moat anyway.
One doesn’t need to invent everything to have a sustainable business in a changing market. You may be able leverage the tools or resources invented by others to compete effectively. But all this change is not easy. Yet we all know that “Hope” is not a strategy.

So, look around and not just at your competitors or at some broker conference. When your Apple watch gives you your pulse. When you talk to your Amazon Echo. When you video chat with your son or daughter. When you turn on the air conditioning in your house from work. Wonder why this isn’t happening regularly in the benefits business. Is the outside moving faster than your inside? If so, well hoping Jack Welch is wrong is probably not a good strategy.

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

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Webinar Invite – Taking HR to New Heights

Posted on May 3, 2017 | Leave a comment

2017_webinar_hr_without_limits_linkedin_mast33

For those employers interested, we are conducting a Webinar about HR and HR Technology that can change the way you think about HR. We guarantee you will hear a perspective on the market that will get you thinking. We have done this live and employers have said, “You made 4 or 5 points that I have never heard before.”

The market is changing and the opportunity to “Take HR to New Heights” exists. The problem is most employers don’t get there because of all the obstacles in the way. We analyzed the market and identified 54 obstacles to success. This webinar will expose those obstacles and provide an action plan to take HR to New Heights.

If you would like to attend please click on this link. REGISTER NOW . This is reserved for employers or partners of ProHCM only.

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Posted in Employee Benefits Distribution, Employer HR, HR and Benefits Technology, Uncategorized

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The Southwest Approach to HR and Benefits Technology

Posted on March 19, 2017 | Leave a comment

Recently I flew from Boston to Ft. Lauderdale on a Boeing 737 with engines made by General Electric. I had a window seat, Wi-Fi, and I got a Diet Coke on the plane. I reached my destination comfortably and on-time. A few weeks prior to that I flew on a Boeing 737 with GE Engines from Boston to Chicago. I had a window seat, Wi-Fi, and a Diet Coke. I was much less comfortable and my flight was 45 minutes late. Boeing was terrible on my Chicago trip.

What is wrong with my last statement? The experience I had on my first flight was from Southwest Airlines and the second was Delta. The technology these airlines used was, for the most part, exactly the same. The experience however, was much different. Boeing was not responsible for my expected outcome. Southwest and Delta were.

Southwest entered a business with non-proprietary technology and managed to shake-up the industry and become one of the most profitable airlines year-in and year out. They looked at every part of the airline business process and changed things that got in the way of achieving their main objective. This lowered costs, made flying more affordable, and improved outcomes while enabling them to be profitable. They didn’t really invent anything. They simply applied new processes to a business that was ripe for a change.

The same opportunities exist in many industries where the technology is simply the tool. Company A creates a product and other companies either use it for their business as Southwest does or they resell, implement, and service some technology. The differentiator in the end isn’t the technology, but the services around the technology.

In the HR and Benefits business many service providers including benefits brokers seem to be missing this concept. They think they have to bring employers the best “aircraft” versus understanding the service model needed to provide better outcomes. The result of focusing on the technology is a lack of understanding of the services.

Another misperception when it comes to technology is the cost. In many industries, the cost of the technology is small compared to the cost of making it run the right way and supporting it. When I fly from Boston to Chicago the majority of the costs are for things other than the aircraft. I saw a statistic that said the cost of the aircraft itself on a per person basis was around $30 per flight.

When it comes to HR and Benefits technology these same rules apply. The cost of the technology often pales in comparison to the cost of implementing, supporting, and operating the system. Yet many are still focused on the cost of the technology. I regularly replace low-cost benefits enrollment systems that actually drive costs up because of all the necessary workarounds because the technology lacked functionality. If I need to fly from Boston to Chicago a single engine plane would not be the optimum technology.

So, when it comes to Benefits technology you must ask yourself, are you Boeing or are you Southwest? Or are you neither? Are companies like ADP, Paychex, bswift, or Namely, more like Southwest or are they Boeing? Or are they both? Maybe trying to be both is the problem.

The HR and Benefits technology business, and maybe the benefits business as a whole could use a little Southwest. While your competitors are looking for that better jet the opportunity to help the employer in their journey is much greater. You can even drive down costs more by understanding the process than beating up some technology vendor. The result can be lower costs and better outcomes. Who doesn’t want that?

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“Alexa – What is my deductible?”

Posted on January 22, 2017 | Leave a comment

When it comes to adoption of technology simple is most often better than complex. Steve Jobs and Apple went to great lengths to make their products simple. Without user adoption products fail. Current technology trends continue the move towards simplicity with the advent of artificial intelligence and personal assistant tools like Amazon’s Echo and the Google Home. Before you know it, these tools will enter the benefits world. The question is, who is going to be first and best? And if I am a benefits broker how does this impact my business?

While many brokers are aware of the vendors that call on them or have tradeshow booths at industry conferences, I believe the benefits technology race is going to heat up with new competition entering the market. These new competitors see the market opportunity to automate large segments of our economy including health insurance and health care. You may have heard of some of these companies like Microsoft, Google, Salesforce.com, and Apple. This would be in addition to current leaders such as ADP and Paychex. The stakes of the game will change and the price of entry, from an investment standpoint, is in the hundreds of millions of dollars. Those with the capital will quickly outpace those with less capital.

Don’t be surprised when you start to see major mergers and acquisitions in the HR and Benefits space. Could Microsoft buy Ultimate Software? Why not? They already purchased LinkedIn and recently hinted at getting deeper into the HR space.

When I look at products like the Amazon Echo and Google Home I see products that have very quickly grabbed market share with high rates of adoption. My wife, who is not an early adopter of technology, quickly became a user of Google Home. Why? Because it is easy. Would she have a better understanding of her health insurance if she could simply ask Google? Absolutely!

Benefits technology, on the other hand, has not had broad adoption by employees. Yes, employers have bought systems or brokers have given them away, but when you look at utilization on the employee side it is abysmal. I believe the reason for this is because there is not enough value as a stand-alone solution to generate broad adoption. Keep in mind that the majority of people hardly use their health care in a given year so there is little need to access such a system. I don’t know about you but I can hardly remember the login to my computer never mind something I may not use for 6 months.

The next generation of technology in the HR and Benefits area is going to have broader and “everyday” value, while being much easier to use. Market leading vendors, especially those with a great deal of capital, will invest in the latest technologies to try and win the technology race and gain more customers. And before you know it you will be saying the following:

“Alexa, is Dr. John Smith from Boston in the Blue Cross network?”

“Ok Google, request Friday off from work?”

“Hey Siri, how much does the average office visit cost?”

“Alexa, what is the balance of my 401k?”

“Ok Google, transfer $500 from my savings to checking?”

The advancement of technology and artificial intelligence has enabled many to have more personalized user experiences. Your Amazon Echo will “get to know you”. Maybe in the near future your doctor will get to know you a little better too.

Many benefits brokers have chosen some technology vendor with a mission of putting as many clients on the system as possible. This is a risky position competitively as more advanced solutions from highly capitalized companies come along. I don’t know many sales people or business owners in any industry who like running around with the 8th best product. Even more so when it is not necessary. The market and your customers do not care if you have invested thousands of dollars on some technology that may quickly fall out of favor.

One should take the advice of Jack Welch, ex- CEO of General Electric who once said,

“If the rate of change on the outside exceeds the rate of change on the inside, the end is near.”

For those that have purchased the Amazon Echo or Google Home you don’t have to look far to see that the outside world is changing faster than the inside. The health insurance and health care industries often feel like they are moving at a snail’s pace. Private Exchanges were lauded as change when they really are a reincarnation of cafeteria plans from the 80’s.

With the Trump administration, changes in health insurance legislation may create a shift that empowers the consumer. The industry may need an army of people on the front lines to help the industry move to a whole new paradigm. The vendors will need help and the employers and employees will need it too. The technology is there. Alexa is ready. Are you?

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Your Competitors May Not Be Who You Think

Posted on January 7, 2017 | Leave a comment

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.

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Webinar Invite – Taking Benefits and HR to the Next Level in 2017

Posted on December 29, 2016 | 1 comment

I know, another webinar invite. This is a really good one though. If you are a benefits broker I guarantee this is worth 45 minutes of your time. Here is the bottom-line with this webinar. We have been delivering technology solutions to both brokers and employers for 16 years now and have seen gaps in the market over that time that are actually being magnified now as the market changes. Many brokers and most employers are often not recognizing those gaps. We think that by filling those gaps you can take an employer’s HR from a 3 to a 9 and improve a broker’s operation in similar ways.

In this webinar, we will share some but not all the secrets. We then introduce a model that we think is quite unique.

The dates are: January 5th, 10th and 12th at 12:00 – 1:00 Eastern Time

If you are a broker and have an interest in attending feel free to click on the link below to register. If we don’t know who you are we may give you a call before approving access to the webinar. Thanks.

Register Here

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

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