Consider benefit fudning methods when choosing software

Integrations -- what every broker wants

The fifth criteria brokers should use to compare benefits administration platforms is the vendor’s licensing model, or how your agency will pay for the product and what the license includes.

When it comes to a license, there are four categories of considerations to understand:

1. Cost: Options include a flat fee license, a minimum plus PEPM license, or a general agency provided license.

2. Training: Could range from no training, to phone-based training, to in-person training — optional or required.

3. Ongoing support: Is there an online knowledge base? How does phone support work? Do you have a dedicated client services representative, or a general line? Are the build-outs completed by the vendor, or by your agency?

4. Add-ons: These are items like 1095-Cs, onboarding, PTO, HR features, and integrations.

Let’s review each of these categories in depth.

Cost

Most agencies will focus on this first. This is natural, as it represents hard dollars that will be coming out of your P&L. While long-term this expense should turn out to be a wonderful investment in your business that pays off in a big way, at first it will represent a hit to your income. It’s also smart to evaluate the long-term impact if you are successful at moving the majority of your clients online.

With that in mind, the most attractive cost model is for an agency to be able to put all of its clients on a platform for one flat monthly or annual fee. In this model, an agency can pay $750 per month and move as many clients as it wants onto the system.

Another option on the market includes a “per employee per month” fee that starts with a minimum. For example, $2 per employee per month with a 1,000 employee minimum. In this scenario, the agency would start out paying $2,000 per month ($2 x 1,000 employee minimum) and then would begin to pay more than $2,000 once it added more than 1,000 employees to the system.

Finally, there are a few options on the market where you can get a license via one of the general agencies with which you work. In this model, you might not pay anything at all for the software. Long-term, though, if you believe that you need to incorporate online benefits into your value proposition, then you’re going to want your own license and relationship directly with the software company.

Upfront training

How much training comes with the license is a big consideration. You can find options ranging from no upfront training at all to requiring that you fly somewhere for a few days of training.

When evaluating this aspect of the license, you should bear in mind that adopting online benefits technology is going to be transformative for your agency. Ultimately, it will change the way you do business. That change will represent huge improvements from the way you process renewals to how you manage adds and terms for your clients.

If you are adopting a system for the first time, the more training, the better. Bear in mind that a lot of training is going to be towards you figuring out with your team how work processes will change within your agency, given the new improvements your system is going to offer you.

Ongoing support

This is another big consideration. How technologically savvy is your support team? Will they find some “hand-holding” to be beneficial as they get going on the new system?

Could you use some extra back-office support when it comes to building out your employer clients during the busiest time of year? It’s likely you’ll find more support to be pretty beneficial versus less.

Add-ons

Finally, it’s important to understand what is included in your license and what costs extra. For example, does the system do 1095-Cs? Do you have to pay extra for that, or is it included in the license? Is electronic reporting of the 1094-C and 1095-C data included or extra? How much? Is all the 1095-C work done by the software company, or do they third-party a portion of it to yet another vendor?

What about the other HR functionality? The system offers PTO tracking. Do you have to pay extra for it? If not, are you expected to support it? If there is an extra charge for it, can the employer pay it and, if they do, will the software company support PTO directly with the employer?

How about COBRA? Does the software company offer COBRA, or is it integrated with other COBRA vendors? How many? Does that have a cost?

Which brings up the other big category of add-ons: integrations. Ultimately, you and your clients will want your system to be integrated with the insurance and payroll companies. There is almost always some sort of add-on cost for these.

For your clients that have less than 100 employees, bear in mind that this is largely going to be a moot point. The insurance companies, as a general rule, can’t integrate below 100 employees. For your clients over 100 employees, make sure to ask how integrations will work. Does the software company do these in-house or outsource them to a third party? Is the software company integrated with any payroll companies? How do those integrations work?

You’re going to want to know that the software company can do integrations. But bear in mind that you will rarely be integrating at the same time you are implementing your new benefits software with your clients. Just getting the software in place with your clients will be your primary focus for the first year after you’ve selected a system. Integrating will generally come after that with the majority of your clients.

A final note on the license model of the system you select

It can be easy to get lost in the weeds evaluating the above categories of considerations. You’ll ultimately find that there are trade-offs among the categories. A system might be a little more expensive, but come with more training. Or it might have a flat fee cost model, but have per employee per month fees for carrier integrations when that comes into play for larger groups.

The bottom line is that you want to look for a licensing model that will allow you to implement affordably, but also successfully.

This column is adapted from the book “Online Benefits Technology: The Strategic Broker’s Guide.”