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Experts offer tips for buying from online health insurance brokers

Comparing benefit options against those available from other sources is often the key to satisfaction, say analysts -- including one who shared his own buying experiences.

Increasingly, technology companies are entering the world of healthcare, offering mainly small to midsize employers software-as-a-service (SaaS) HR tools -- sometimes for free -- that allow companies to manage their health insurance needs. Some do so by becoming online health insurance brokers, typically collecting commissions from the insurance carriers in their networks when they refer customers.

But with so many tech companies taking the place of community-based brokers, how do HR managers and their employers know which option is best for them?

One piece of advice: take your time. Evaluate the different companies, talk with them and determine which platform is willing to put time into you as a customer regardless of how large or small your company is, said Adam Beck, assistant professor of health insurance at The American College of Financial Services in Bryn Mawr, Pa.

"There are new players in this field every month," he said. "So, unless as a company you're in a rush to make a decision right now, you might stick with your health insurance approach for the next year and then see where things are at. This is still very early on."

The barrier to switch from one SaaS-based broker to another is relatively low, Beck said. That means a CEO can basically wake up one day and decide to switch from company A to company B, if things aren't working out with company A.

"You can migrate your information so easily that if you have less-than-stellar customer service, it's very easy, especially now that there are more competitors, to go with someone else." He added that attentive customer service is probably going to be the make-or-break issue. The winning provider shouldn't just be the one that's able to offer benefits but the one that can explain them and then be there to advise employees.

Don't just buy on price. Look at who's actually providing the benefits.
Adam Beckassistant professor of health insurance, American College of Financial Services

"So don't just buy on price," Beck said. "Look at who's actually providing the benefits, because you're not getting your health insurance from the SaaS brokers like Namely or Zenefits. You're getting the benefits from the carriers. So, ensure you're not getting insurance from a carrier that's going to be out of business in a year or two."

It's also critical to figure out what your needs are as a company, especially with vendors that bundle in other HR services, he said. "Don't get roped into adding other benefits -- and spending more money -- if you don't need them," Beck said.

An analyst's experience buying through health insurance brokers

SaaS health insurance brokers provide employers with automation and some level of cookie-cutter process to be able to support various types of benefits, said Hyoun Park, chief research officer at Blue Hill Research, based in Boston.

"The delivery seems to be simplistic in nature, which is a plus or minus based on companies' needs," he said.

When companies sign up with these SaaS health insurance brokers, they're asked which carriers they're currently working with or what specific insurance plans they have, according to Park. After the brokers get that information, they offer these employers plans from the state providers and a limited number of carriers.

This can be a challenge for companies that support employees in multiple states or with more complicated types of family structures or where specific employees may have different insurance needs that may or may not be covered within the actual insurance portal, Park said.

"From a personal view as a small business, we tried a couple vendors, but we were unable to make it work, so we brought our insurance back in house," he said. "We found that the service of working with a portal was not worth the lack of flexibility."

Park said it's vital to ensure that any SaaS-based insurance broker you pick can support the flexibility of your business. It's also important to benchmark your own insurance costs before you work with one of these portals to compare the offerings they provide.

"This is to make sure that you're actually getting either the most cost-effective or most valuable plan that you can get and to make sure that you're not unduly compromised by either the lack of choice or lack of flexibility in the portal," Park said.

Blue Hill Research was a Zenefits customer for a couple months, he said. Zenefits is one of the vendors that gives its technology to customers and takes a commission from the carriers.

"The business model seemed interesting enough because there's no cost to actually start using Zenefits for basic services," Park said.

However, he said Blue Hill Research soon discovered that Zenefits lacked the choice of plans that the company had had with its previous insurance provider -- something that couldn't be determined ahead of time.

"We found that we were simplified to two choices with Zenefits -- just HMO versus PPO," he said. "There was no nuance, even if employees had specific health problems or specific insurance needs. We were unable to see the options that were in place beforehand. All we knew beforehand was that our insurance provider was supported by Zenefits."

There was also another issue, Park said. After the employees signed on for health insurance, they were asked to provide additional personal information that was unrelated to their actual policies.

"It made sense for Zenefits wanting to get as much personal information about each employee and potentially upsell employees into additional services," Park said. "But as a company, we found that practice to be invasive. It did not fit with our own HR and corporate culture."

Don't be wowed by the technology

Holger Mueller, vice president and principal analyst for San Francisco-based Constellation Research Inc., cautioned that companies should not just let their CIOs or CTOs make the decisions to switch to SaaS health insurance brokers based on the technology used to automate the processes. Rather, HR must also do due diligence on the benefits side of the issue.

"HR has to ask the brokers the right questions about the benefits your company already has," he said. "They know what is covered and they have to ask if the same things are covered."

When you sign up with a cloud-based broker, you should also ensure that your rate is guaranteed no matter what, Mueller said.

Some brokers get better conditions from the carriers than other brokers, he said. Because vendors such as Zenefits are signing up small companies, those conditions are based on the aggregate of value.

"They [aren't signing up companies] with large employee populations, so the software-based broker tells the insurance carrier it's going to bring in a quarter of a million in a specific age group, for example, and the worst thing that can happen is they don't sign up enough employees," Mueller said.

However, if the broker doesn't reach its goal, the carriers and the brokers work together to price the plans a little higher than what they normally would be, he said.

"So, the same plans from different brokers can have different conditions," Mueller said. "As a company signing up with them, you want to make sure that the rate is guaranteed no matter what. Because if the same number of employees [doesn't] sign up next year as signed up this year, you're going to see a price increase."

Finally, Mark Johnson, president at ERISA Benefits Consulting Inc., based in Grapevine, Texas, said small and midsize employers should use consultants to evaluate what the various SaaS health insurance brokers are offering as well as to check their references.

"[Employers] with [fewer] than 100 employees most need someone to guide them through the process," he said. "They might say they don't need a consultant because they only have 20 employees. But I would argue they need it the most because they have fewer resources to devote to the process on an ongoing basis and to managing the relationship with the broker."

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