Is The Affordable Care Act Pushing Carriers Into The Software Business?

October 24, 2014 Doug Devlin

A post from Doug Devlin, CEO of Zuman, originally posted on LinkedIn,  November 25, 2014.

When insurance giant, Aetna, acquired benefits administration software company, bswift this month, many within the benefits industry took notice. The move is more than an acquisition; it’s a continuing trend for carriers to control information at its source, and no wonder as the Affordable Care Act (ACA) squeezes margins and creates increasing pricing complexity for employers. The move could also signal the beginning of a revolution transforming employee benefits and payroll into a data centric software model.
The new paradigm revolves around analysis and the application of data in the post-ACA world where the need isn’t an annual occurrence but real-time.

One way of looking at Aetna’s purchase is as a move to consolidate services onto one, easy-to-navigate platform. That move will continue to reinforce carrier’s belief in streamlining their costs of employer acquisition and administration while at the same time powering their exchange model. Employers who once relied on outsiders to provide valuable insight into their client’s data maybe moving to a one-stop shop software/carrier model for more efficiency.

Perhaps carriers may see the appeal of being a software company? And shopping for companies with your balance sheet certainly could be less expensive than developing software internally. Large companies, especially carriers, don’t have the agility to make innovation a simple process. While smaller companies, can innovate easily, but may not have the capital. In this way acquisitions become almost essential for companies to remain innovative and relevant, even for insurance companies.

This type of acquisition is not without precedent. In November 2013, global professional services firm, Towers Watson acquired Liazon, a private health care exchange in a move to consolidate services for their clients. Expect to see more of this type of horizontal integration. Everyone is looking to offer more to their customers than just the one thing they’ve been doing for years, including providing analysis of information through software.

As the trend continues, bigger companies will gain ownership of data and exclude the smaller companies from the marketplace. This set up is ideal for the realization of a people operations model; one where human resources, payroll and benefits data are all in one central location. This way, the right data can be used at the right time for maximum benefit to both employers and its employees. Whether a company is looking to scale their business, reduce cost or mitigate risk, every opportunity for change or adjustments can be clearly marked and easily accessed.

The Value of Controlling the Data

The relationship between benefits and data will continue to develop with increasing focus on the individual as the consumer.

In the past, HR has been siloed. You need to look no further than the bi-monthly paycheck to see evidence of the inefficiency of keeping benefits and data apart. Nearly every line item represents a company converging with their own, separate data twice a month. That model is on its way out as consumers begin to demand more freedom to customize their benefits and compensation in the best way.

Ownership of data will allow carriers to streamline their own administration as well as understand where people fit into their product lines. Ultimately this may provide employers and brokers with enhanced administration options as well as a deeper understanding of underlying trends, only the future knows. Hold on because the human resources software and services industry is about to get really interesting.

About the Author

Doug Devlin

Doug is the Chief Executive Officer of Zuman. He co-founded Zuman after serving the past 17 years as Chief Financial Officer and Chief Operating Officer at TriNet (NYSE: TNET). Doug graduated from California State University at Chico with a BS in Business Administration, and received his MBA from Golden Gate University.

More Content by Doug Devlin
Previous Article
Strategies to Increase HR Efficiency
Strategies to Increase HR Efficiency

Inefficiencies in your human resources department can slow down many aspects of a company's business strate...

Next Article
Bitcoin and the Future of Your Paycheck
Bitcoin and the Future of Your Paycheck

Want to learn what Bitcoin is and how it ties to your paycheck? Learn about it from Zuman.