Technology is the future of benefits, but it’s not what will make or break your business

In the employee benefits world, technology seems to be the way in the door. Just ask Zenefits. But, how do you know what technology you need, and where do you go to get it?

Technology seems to be the buzz in the benefits market and one company has put itself in the center of the discussion. HR Technology Advisors (HRT) and its President Joe Markland have been traveling the benefits technology circles since 1997 and continue to be one of the voices taking positions on things like private exchanges; "A single medical carrier with multiple options is not a private exchange," Markland says, and Zenefits; “Why the Utah Insurance Dept. is wrong about Zenefits.” The common theme in most of HRT’s and Markland’s positions is that while technology may often be central to the conversation, in the end it is not about the technology. It is about solving business problems. Leveraging technology is often one option to solve a problem. 

Markland and his partner Don Rowe both entered the technology business at the turn of the century. Markland as CEO of StarNex, a P&C and benefits rating engine, and Rowe worked for Anderson Consulting leading the UnitedHealthcare launch of ChannelPoint. ChannelPoint was not shy about saying it was going to put the broker out of business. It was the first of many such threats from a technology company over the past two decades. “I have seen ChannelPoint and probably 30 or more other companies go out of business in the past 18 years. And this game is far from over. There will be new players entering the market and many more casualties,” says Markland.

The year 1997 was the heat of the dot-com boom and probably considered the infancy stages of the Web-based benefits technology industry. “I think I saw my first demos of benefits enrollment vendors Employease on a 28.8 modem in 1998 and bswift in 1999. Both were painfully slow,” recalls Markland.

HRT, Employease and bswift do have a common connection. All of the founders are graduates of Williams College in Massachusetts. “John Nail, CEO of Employease, helped me get into the benefits business with Unum in 1986, and Rich Gallun, bswift’s founder, was a year behind me at Williams. Tom Casey, another Employease founder, and I also played football together at Williams.”

The trend for those with the Williams connection is positive. ADP bought Employease in 2006 for $170 million and bswift recently sold to Aetna for $400 million. Markland may be hoping things come in threes.

Middle man

HRT has evolved to be a national HR and benefits technology consulting firm that consults with and educates more than 180 benefit brokerage firms on technology. They also work with the brokers’ clients and have consulted with more than 1,000 employers around HR and benefits technology. In the process, more than 500 purchased a solution from more than 30 different vendors.

This position as a middle man has helped HRT gain an in-depth understanding of the technology market. As Markland says, “When you ask a lot of people what they like and don’t like, want and don’t want, you get a pretty good understanding about where the market is. I can assure you the HR/benefits technology market is like any other industry. People buy low-end solutions and high-end solutions. That’s why I really don’t like saying which vendor is good or bad. The market will determine which companies are good or bad.” 

With technology firms like Zenefits disrupting the market, HRT has been very busy responding to broker inquiries about how they are doing it. “I get at least five calls a week about Zenefits. Most brokers I have spoken to really don’t understand their model or why they are generating the business they are. They think it is about the technology, and so go they looking for better technology. In my opinion, in the end the technology becomes the commodity. Think of Uber today. What is their greatest asset? Is it their technology or is it their brand and driver network? I think the technology is easily duplicated,” says Markland. “What is not is the driver network and brand. I think Zenefits falls somewhat into that category. Technology that does what Zenefits does is readily available in the market. What they are successful at is building their brand, marketing and their service model around their technology. They promise a better outcome. Their challenge will be delivering on that promise while managing growth.”

When it comes to the issue of rebating, Markland took sides with Zenefits against the state of Utah. It was a position that many brokers may not have wanted to hear. “If I am a broker and agree to help an employer enroll their employees in benefit plans, then I don’t see why it matters whether I pay someone on my staff to travel around the state or country to conduct employee meetings, have enrollment forms faxed to the broker who types the information into the carrier system, or has them enroll using some enrollment system,” Markland says. “Any way, it costs money. Technology is one of several options and in many cases costs less money than using people.”  

The future of technology

So where does HRT think the benefits technology market is going? HRT believes that HR, benefits, and payroll technology and services will continue to merge. According to their most recent technology survey, it is a payroll company, ADP, that is the largest benefits enrollment vendor in the market with a little over 25% market share. And just recently Paychex reported that its Q3 revenue grew 8%, primarily on the back of demand in their HR outsourcing business. Payroll service revenue has increased 2% to $423.8 million. But HR revenue leapt 19% to $269.8 million, according to Investor’s Business Daily. Other firms, like technology vendor Namely, have also entered the benefit business as a broker.

According to Markland, there are many opportunities for brokers: “The entire benefits market is going to move to the Web and mobile. Employers are going to need help. So who wants to help them?”

However, he cautions brokers against picking teams when it comes to technology vendors. “While one company may be raising $20 million and another $60 million to enter the benefits technology business, existing market leaders like ADP, Paychex, Ceridian, Ultimate Software, and Kronos are profitable and investing hundreds of millions into their technology,” he says. “They aren’t going to let the market slip away.”

Markland adds, “There are a few things that I learned about the technology business over the past 18 years. First, you can’t win or stop a technology war. Second, competing in this space costs a real lot of money. So when some new technology vendor comes along and says they have the ‘best’ technology, run, or maybe walk slowly.”

Remember, in the end, it is not about the technology. You, the broker, can help deliver a better outcome. If you are looking for technology, why not use a broker of technology? Contact Markland at (508) 520-9800 or jmarkland@hrtadvisors.com.

Editor’s note: This is the second in a regular series of blogs from Hodges that will highlight products and services that will help advisers sell and retain business and increase their bottom line.

Also see: "How to overcome two of your biggest sales hurdles."

Hodges, RHU, REBC, CBC, is president of The Brokers Broker and a senior adviser at GMG Savings. Reach him at khodges@thebrokersbroker.biz or khodges@gmgsavings.com.

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