These days, an increasing number of payroll service providers have begun expanding their offerings to include various types of insurance, such as worker’s compensation and even health insurance.
For those businesses who don’t have a long-term relationship with a broker and may be looking to streamline the process of getting health benefits, the prospect of buying health insurance directly from your existing payroll vendor might seem like a good idea. After all, wouldn't it be nice to seamlessly integrate your company's health insurance to your existing payroll system?
However, is this really in your best interest?
Before you decide to purchase health insurance through your payroll vendor, there are some important things you should consider.
Are They Really Working For You?
When you consider purchasing health insurance through your payroll vendor rather than through a health insurance agent or broker, it is important to remember that their main service offering is payroll services. Group and individual health insurance is an add-on service.
Many of these companies added health insurance services when the Affordable Care Act passed, and it became mandatory for businesses with 50 or more employees to provide health insurance.
From a business standpoint, what better way to capitalize on the new law than to market this service to your existing customers. With ADP and Paychex proclaiming that worldwide they each service 700,000 and 605,000 customers respectively, marketing health insurance to their large numbers of clients in the United States would be a great way to increase the profit to their bottom line.
So, is it surprising that they would start offering health insurance?
And, they aren’t the only ones…companies like Gusto and SurePayroll have started doing it as well.
While this may appear to be an easy way to purchase health insurance, what happens after you purchase your insurance?
When you look at the health insurance services at ADP, Paychex and other payroll companies, you will notice that they have all set up subsidiary insurance companies. SurePayroll is a subsidiary of Paychex, so they partner with Paychex Insurance Agency.
We took a look at all of their health insurance pages from their websites and here is what we found:
- ADP, Paychex don’t list which carriers they work with. SurePayroll indicates that they partner with Paychex, so they don’t list carriers either. Gusto lists only 6 carriers.
- ADP says they sell through their insurance agency, its licensed agents or its licensed insurance partners. Paychex doesn’t say anything about their agents or who will be helping you. SurePayroll says they have knowledgeable account executives that consult with you. Gusto says they have licensed brokers that help you choose a plan.
- Gusto is the only company that list their agent’s names. One person is listed as the only agent for 27 states.
- All of the companies say they only offer insurance in a handful of states right now.
- ADP says in small print on one of their pages that they don’t do claims administration.
- All of them focus on how health insurance benefits your company and how you can interface with their payroll service.
So, what does all of this mean?
You have no idea what insurance options you will get or what the experience is of the agents or brokers who will be helping you.
If you look at reviews for ADP in particular, you will see some very unhappy customers on the payroll side of the business. Specifically, there were taxes and child support payments that weren’t paid even though the money had been collected by ADP. And, when the employee or business had followed up with ADP, it had taken one or more months to get the situation rectified. And, some of the Paychex reviews aren’t much better.
Can you afford these kinds of problems? Health insurance premiums for you or your employees not being paid?
You have a business to run! When you need help, do you want to deal a with call center for your customer service? Or would you rather have a smaller, experienced insurance broker who has experience, your best interest in mind and potentially contacts at the health insurance company helping you resolve the issue.
A quality insurance broker will act as an advisor and guide throughout the entire insurance process from selecting coverage to helping you resolve issues with claims.
Could It Cost You More?
In his article, “Why Buying Workers Compensation Insurance Through Your Payroll Provider is a Bad Idea”, Michael Stoop mentions the following:
“The payroll companies tell you that they are so huge they have negotiated preferential rates with companies like the Hartford where you can leverage their buying power. This may be true in certain instances in the FIRST year. The reality is they have really negotiated better commission structures for themselves since they are leveraging their marketing and payroll platform, delivering clients to their preferred insurance carrier in droves.”
He also mentioned that the rates creep up and, ultimately, you could be paying almost double the national average in the long run.
The Bottom Line
So, what does this mean for you?
While there may be some up front practical and logistical benefits to purchasing a health insurance plan directly through your existing payroll provider, it's important to take a step back and carefully weigh both the pros and cons before deciding who to buy your health insurance from.
Many businesses will find that they're better off sticking with a reputable insurance agent or broker who will keep their best interests in mind. These agents and brokers also have the longstanding industry experience and expertise needed to make the best recommendations for your company's needs, as well as advocate for you when you need it.
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