As more and more companies are flooded with administrative duties due to the Affordable Care Act, cloud-based HR and benefits systems such as Zenefits are starting to gain a substantial hold in the employer market.
Smaller employers, those under 1,000 employees, all seem to be suffering from the same problems, according to Zenefits CEO Parker Conrad. Thanks to separate systems for benefits and HR functionalities such as payroll, health care, dental care and paid-time off, Conrad says these disconnected platforms create an unnecessary, administrative layer of data entry and old-fashioned faxing.
If the world made any sense whatsoever, there would be a single system of record that everythings connected to, Conrad says.
Online payroll, benefits, and compliance provider Zenefits seeks to eliminate the confusion associated with the ACA and other employer benefits needs. The platform was created in 2013 by Conrad and Laks Srini; the company now has just over 270 employees and helps about 2,000 companies manage more than 50,000 employees. The system is also free, and is mostly funded by the various service providers on its system, which right now are insurance companies, Conrad says.
With the employer mandate fully rolling out in 2015, automation and reporting key information is a concern for both small and large employers. High health care costs are also a worry. Nationwide, approximately 96% of employers have fewer than 50 employees, according to the Treasury Department indicating a need for smaller companies to get this right or pay the price.
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David Chase, health care policy director for Small Business Majority, a national small business organization, says the ACA has put a renewed focus on health coverage and benefits.
Businesses are looking at what they are offering what are their strategies, how do they administer it, Chase explains. Because of the law, there are just so many options out there for employers and so it sort of makes sense to look at the whole landscape of different options, as far as going to an exchange, working with an agent or broker, offering group coverage or your employees going to the individual market to get the subsidy. Were seeing those sorts of analyses going on, [where employers are] seeing whats out there and what makes the most sense for their bottom line.
After just eight months in existence, Zenefits was labeled as the largest insurance broker in the small group market for Anthem Blue Cross. And in June, Zenefits received $66.5 million investment from venture capital firms Andreessen Horowitz and Institutional Venture Partners after it was reportedly projected for 1300% growth this year.
Given its San Francisco offices proximity to Silicon Valley, tech companies are a large part of Zenefits business clientele. But now, Conrad says Zenefits zeal for benefits management is attracting school systems, architectural firms, manufacturing companies and even a circus some of which are outside of the Golden State.
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This kind of problem is not unique to tech companies, Conrad says. I think tech companies are the most outraged [by the fact that] to enroll someone in health insurance you need to send in a fax, and no one likes dealing with that.
He adds that there is currently no service provider that can simultaneously inform employers about all systems, including payroll, benefit levels, benefits eligibility and hours worked.
No one is in a position to know all that information, and the employer is left doing this themselves, says Conrad, adding that the company is set to launch a new time and attendance platform in the next two weeks.
At the Small Business Majority, a group that includes six million companies which collectively employ about 43 million people, Chase explains that companies will likely maintain their broker relationships as they navigate the choppy waters of the ACA.
Because Zenefits employees are all licensed insurance brokers, Chase says the organization does not see cloud-based platforms as taking business away from brokers.
Its just a difference of an online broker versus an in-person, in your town broker, Chase notes. Our perspective is, small businesses in particular are not health care experts. They know about performing their [own] service, and health insurance is this foreign language.
