Payroll Providers Are Killing The Benefits Industry
Some payroll providers actively disregard insurance rebating laws, and remove the opportunity for an open competitive market in the Employee Benefits space. This is harmful to Consultants and Employers alike. As many of you know, I have been working on the Sanus Benefits Portal for the past 5 years. Using my experience as a consultant to curate an end to end tool for other consultants and employers alike. Which gives me first hand knowledge of these underhanded tactics that need to be addressed and payroll providers that facilitate these actions held accountable.
How are they doing it?
Payroll providers are offering cash incentives and free services to employers in exchange for being their client. Technically this is not illegal as long as its strictly for payroll services. However these payroll providers are not just providing payroll services, they are also providing Employee Benefits. This is where the issue lies. These platforms are trying to be the singular resource for all group needs including Employee Benefits. If they are in anyway selling or providing Employee Benefits, they are breaking the law by offering cash incentives to employers in exchange for being their client. This is a violation of insurance rebating laws and is harmful to the industry as a whole. On top of this, these payroll providers are actively blocking employee benefits software and direct consultants from accessing their API to administer their clients effectively. So if groups wanted to use the rebate by said payroll provider, but keep their consultant, they would have to do a lot of manual labor. There by forcing them to use the payroll provider's platform and ending relationship with consultant because they refused API access. This has gone on for close to a decade now and it is time for it to stop.
PEO Co-Employment Health Insurance Pooling
Some payroll providers that offer all-inclusive platforms operate as Professional Employer Organizations (PEOs). There is nothing inherently wrong with the PEO model itself, but the current market regulations give them a significant structural advantage that goes far beyond simple service value. PEOs via Co-Employment contracts are the only current option for nationwide pooling of group health insurance. This is a huge advantage especially in the small group market. Small busniesses are being crushed by benefit costs and are having to turn to co-employment not through choice but through force. Either they join or they have a hard time offering competitive benefits to attract top talent.
In fact, 9 out of 10 groups that join PEOs specifically site benefit costs of being the main driver in their decision to join. Not for the HR support they receive, Workers Comp Discounts, or even the simplicity of everything being on one platform. Just the benefits which is telling of the monopoly they currently hold in the marketplace.
Groups should not be forced into a Co-Employment contract to access competitive benefits. On top of that, the market should not be so favorable for Payroll providers and cause this much of an egregious consolidation of market power. Employee Benefits is often the 2nd highest line item for companies across the US. It is a critical part of a business and should not be lumped together with payroll.
A more balanced business focused model would level the playing field and allow for pooled health plans outside of co-employment contracts. It doesnt matter what they lobbyist say, or what is promised in policy discussions, the people are hurting. It is time for change.
Are all Payroll Providers Evil?
No, far from it. There are a lot of payroll providers that care more about their consumers than the bottom line. They actually actively help consultancy firms and ensure open access to data for their clients as well as partner consultants. You would be surprised to learn that one of the larger payroll providers in the US QuickBooks is a bright spot in this landscape. They provide API endpoints from day 1 for all potential employee benefit partners after verification.
In addition to Quickbooks there are other payroll providers such as HR&P that are actively working to provide a better experience for their clients and partners. They are not trying to be the singular resource for all group needs, but rather a partner in the process. If you know other payroll providers open to collaboration please reach out to me directly at bstevenson@sanusbenefits.com. Would love to test them out and verify to post them on this page.
What can be done?
The Department of Insurance needs to step in and start enforcing rebating laws on these all inclusive portals. Payroll providers that have this practice in place need to be stripped of their insurance licenses and fined for their actions. If any consultancy firmed tried what they are doing we would be held accountable so should they.
Please reach out directly to your states Department of Insurance and bring this to their attention. The more people that reach out the more likely they are to take action.
If you are in Texas the complaint portal is here. Whenever you file a compliant please include a specific payroll provider that you have witnessed first hand impeding brokerages and actively rebating. This is an industry wide issue and needs to be addressed by each State's Department of Insurance.
