Case Study
How a “free” HR platform created hidden costs, compliance risks, and limited choices.
ZENEFITS COMPARISON
When Free Actually Costs More
After multiple solicitations for a “free” HR portal and easier benefit administration this company In switched to Zenefits.
As part of the ‘free offer’ this New Jersey-based company of 22 employees had to name Zenefits as their insurance broker on their medical, dental and vision coverage.
Servicing would be handled by a call center in Arizona. The HR portal was a self-service platform that the company discovered was their responsibility to build out.
On the first health insurance renewal the company received a 30% increase from Aetna. They also had an HRA through Zenefits; dental and vison coverage with Guardian.
Their new ‘broker’ automatically sent a renewal spreadsheet with two Aetna options, and two options from one other insurance carrier.
They received a spreadsheet detailing the Guardian renewal of 9%. Spreadsheet looked really nice though.
However, this is what the company received for “free”
- No information on HRA utilization
- No advice on renewal options besides the spreadsheet options
- Recommendation resulted in extra cost to the company ranging from 7%, which doubled the employee’s out of pocket scenario. Zenefits could not offer any assurance that switching carriers would not affect existing provider relationships. The advice of ‘you can have your employees call their doctors to find out’ was not reassuring
- Group decided to renew with the current plan, costing the company an extra $17,000.
The owner gave us a call after the renewal process and asked if we can provide some guidance, something he felt was sorely lacking during the renewal process he just experienced
VantagePoint’s analysis uncovered the following:
- Zenefits incorrectly allowed the owners to participate int eh HRA. An IRS violation
- Zenefits never set up a section 125 to allow health insurance premiums deduction pre-tax. Anther IRS violation
- The employee-paid Guardian plan was set-up with post-tax deductions. A costly mistake hurting employee take-home pay
- Zenefits only showed on other carrier option when there were four (4) other carriers available in the same market
VantagePoint’s plan of action and results:
- We obtained the HRA utilization and re-structured the HRA to a lower cost H.S.A. compatible medical plan with Aetna.
- Result: no provider disruption to the employee, lower fixed cost for the employer.
- Result: renewal action lowers employer costs 11.5%. Net cost swing of 41.5%
- Created H.S.A. accounts for the three owners. Created new tax deduction of over $20,000 for them
