My Twittersphere is telling me that Alden's coverage of the company has brought this all to light, then I got thinking about what a great hire that was for BuzzFeed, poaching him from the NYT.
oh wow. Hopefully zenefits stands behind their employees, because this looks scary:
In Washington state [...] 83% of the insurance policies sold or serviced by
the company through August 2015 were peddled by employees without necessary
state licenses [...]
[...]
Washington law is particularly severe when it comes to the unlicensed sale
of insurance. Under the law, anyone who knowingly sells, solicits, or
negotiates insurance without the proper state license can be punished with a
prison sentence of up to 10 years, as well as a civil penalty of up to
$25,000 for each violation.
A large part of the insurance industry does not like the Zenefits business model (free software to be your broker), so I'd bet regulators are presumably getting a lot of pressure from the insurance lobby to do something quick.
Except when "being your broker" means "some random sales dude with no training nor experience is handling your company's health insurance."
It's not particularly hard to get licensed (usually around $100, a training course of 40-100 hours (which they are large enough, they could set up inhouse), and possibly fingerprinting). Is it a hassle to get licenses in multiple states? Yeah--though most states honor other state's licenses, and just require the fee then.
In any case, this is table stakes--and if they can't get this basic aspect right (after being warned for years!) how well do you think they manage the tricky stuff? And why aren't they hiring experienced health brokers in the first place?
(The stuff about illegal rebates because they give away their software is garbage though. I'm 100% on their side for that.)
I don't disagree that it's super easy to get a license and should be done regardless – but, geez, why is that a requirement? What's so special about selling health insurance that you should go to jail for up to 10 years if you're not licensed in it?
I'm curious because there must be something obvious I'm missing.
Because this is people's health you're talking about.
Do you feel drivers should have to get a drivers licenses? I hope you don't think Uber should just hire people off the street and put them in cars without proper licenses.
A simple health example off the top of my head - you sell health insurance to someone without understanding the product because you're so keen to 'make the sale'. Meanwhile you promised the buyer it would cover that heart condition he has when in fact you have no idea that it doesn't. A couple years later he needs heart surgery and finds out the plan he's been paying into doesn't cover his condition and now he cannot work to provide for his family, nor can he get treatment to get better.
> Because this is people's health you're talking about.
That argument is about as valuable as "think of the children."
> Do you feel drivers should have to get a drivers licenses?
That's not the right analogy. The equivalent would be requiring special licenses for all car dealership employees, which is not required. Salespeople aren't themselves doing anything medical and there's no reason they should have additional requirements beyond normal salespeople. We already have laws covering both (a) fraud, (b) minimum requirements of healthcare plans.
> A simple health example off the top of my head
Existing consumer protection laws would cover this. You can't sell a product and claim it has a feature which it doesn't — that's fraud.
Nothing about health insurance should mean that salespeople should require licensing. It's pure rent-seeking. There are plenty of other dangerous things which are sold by salespeople without licenses.
Perhaps a specific Zenefits example of employee incompetence is of use here.
The lady in this example is clearly not competent, and should not be selling products that people depend on for their health.
Not sure why you feel having gone through the hoops to demonstrate competence, learn about the various products, and how to advise clients of their options is merely 'rent seeking'.
---
"I made like $15,000 in the time I was there, just on commissions. And I never got my license," said an insurance salesperson who left Zenefits this summer. She estimated she had more than 100 conversations with different customers about insurance. "I took my test three times in a row, and I failed. They still let me work."
Without her license, she had to improvise on calls with customers.
When faced with a tricky question, "I would just google it,” she said. She would tell the customer, "Hold on one second, let me email the expert, he's on the line, hold on one second, I'll get back to you.” But in reality, “I would pick one of the first three links and I would just go off of that."
I deal with incompetence on a daily basis. Everyone from banks to airlines have incompetent employees, and we're not demanding that all customer support agents undergo licensing requirements. We live in a free market and the best way to deal with incompetence is the market. (Ex. I switched my bank after getting frustrated with incompetent tellers.)
Once again: the worst that an insurance salesperson can do is sell you bad insurance. They're not actually involved in medical procedures, so any harm they can do is financial. And if that harm is due to fraud (misrepresenting a product to you), you have legal remedies. Bank customer support people have just as much potential to cause financial harm, but we don't require them to be licensed.
Even more to the point: I can personally sign up for insurance directly on the internet, without talking to any licensed salesperson. If licenses salespeople are so essential to insurance, why can I buy insurance without interacting with one?
As far as I'm concerned, the only professions which should require government licensing are those where tort is insufficient to correct wrongs. (ie. someone can die: doctors, civil engineers, etc.)
"Once again: the worst that an insurance salesperson can do is sell you bad insurance. They're not actually involved in medical procedures, so any harm they can do is financial."
Sorry, there are very clear knock-on health effects here you're sweeping under the rug. Eg, if you're expecting to be covered for an urgent emergency life-saving procedure. Maybe you personally have sufficient cash on hand to pay for any required emergency surgery, that doesn't mean it's just a 'financial' problem to everybody else.
Do you really think it's appropriate to have someone be denied a medical procedure, and hope they survive so they can go through a legal challenge afterwards for 'fraud', and hope they can successfully provide proof of fraud over incompetence based on some phone conversation several years ago?
Instead of the much simpler solution of requiring some minimum license for the insurance seller?
I'm not sure about your online purchase example. Are you 100% sure these are the same insurance products requiring licenses as mentioned in the article, that no human sanity checks the product during the purchase process, or that the online algorithm itself didn't go through a sufficient license-compliant certification process?
> if you're expecting to be covered for an urgent emergency life-saving procedure
You will never be refused emergency treatment just because your insurance doesn't cover it. That's the law in the United States.
You will get a huge bill afterwards and there will absolutely be financial consequences, but not medical ones.
It's illegal for a hospital ER to refuse you due to lack of sufficient insurance. The point is that you won't die, so you will be around to come back and sue the broker. (In fact, insurance lawsuits are super common.)
Not to mention that we're dealing with a hypothetical case where you do actually have insurance but it's somehow insufficient (which, by the way, is unlikely under Obamacare). In that case, you would absolutely get treated, but your insurer would refuse to cover the bill and would pass it on to you. You could then sue Zenefits for misrepresenting the product and seek damages to cover the bill.
> same insurance products requiring licenses as mentioned in the article
They're not the same in that I'm talking about individual insurance and the article is group insurance, but that's irrelevant to the point. If there are serious medical consequences to buying insurance without licensed supervision, I shouldn't be able to buy my own insurance online.
FYI I believe they meant emergencies as in, any kind of medical service or procedure that your life may depend on. Which does not automatically mean the "emergency room." I.e. a much-needed surgery, drug, testing, etc.
This happens all of the time, people cannot go see a doctor or receive a medication because of an insurance goof up. And then they have to wait. And wait. And legal remedies are not guaranteed to solve the problem, and such remedies should not be relied upon as a fallback for untrained insurance salespeople.
What exactly are you trying to convince us of? That insurance sales should be have no licensing requirements? And you're hinging your argument on the fact that it is "financial" and not "health" related (which like I said above is not true). In that case are you also in support of getting rid of licensing and other regulations in the banking and finance industry?
You will never be refused emergency treatment just because your insurance
doesn't cover it. That's the law in the United States.
You will get a huge bill afterwards and there will absolutely be financial
consequences, but not medical ones.
Even ignoring the financial consequences, you literally have no idea what you're talking about. Hospitals are required to patch you up this second, yes -- but they don't have to treat underlying conditions until you're going to die from them. Regardless of how much damage that does. You can certainly die of very treatable diseases. Need a ct/mri, blood scans, cancer tests? Well, unless you're going to die of it this second, a hospital is not (and often won't) required to perform them.
The law you're citing -- EMTALA -- merely requires hospitals to stabilize patients.
>Once again: the worst that an insurance salesperson can do is sell you bad insurance. They're not actually involved in medical procedures, so any harm they can do is financial.
That's it, huh? Just financial? Only, you might get stuck holding the bag for a bunch of medical bills that aren't covered by some insurance policy you bought, so you get to spend your sick days fighting a legal battle against a company you might never be able to recover a cent from.
As someone in the industry but not in the US, I'd say this is a case where your ignorance (and you are clearly ignorant here) is more of a hindrance than a benefit.
Providing insurance advice is the same as financial planning, mortgages, investments and any of a number of professions that are all licenced by the state. The reason for these licences is because not having them creates a wealth of misinformation that can (and historically has) resulted in massive amount of fraud and theft from consumers, because - like you - they generally aren't knowledgeable enough to be able to discern a difference of professional opinion from someone selling snake oil.
A licence is a minimum requirement to show to everyone that you have grasped the basic concepts and rules surrounding the product you are advising others on. It does some other things as well, like ensure you have proper E&O insurance and stay up to date with changing legislation, but that isn't its primary purpose.
Licencing is a form of consumer protection. End of story. Arguing that it isn't necessary and/or consumers in these industries don't need protection to counter their ignorance (which is the entire reason they are buying advice in the first place) is naive almost to the point of being moronic.
Errr...maybe the insurance carriers only want knowledgeable people selling their stuff? Who do you think gets sued if there is a problem? Insurance has been sold for a long long time. Another aspect is that if you a professional insurance agent, losing your license is a serious issue...so you won't act in ways to jeopardize it.
Thanks, I'm sure more articles will come online soon.
I hear that it was compliance-related, and that Zenefits is holding a mandatory all-hands right now for all employees. Peter Thiel also joined their board.
The buzzfeed article cited elsewhere in the thread goes into to details on at least one of the major compliance problems: most of their policies in Washington State -- which has rather strict, including potential prison sentences, rules on this -- were apparently sold by unlicensed brokers, in violation of both the law of the State and Zenefits contracts with insurers.
It has more information on the leadup for sure, but given the current announcement, the text of Sacks' email seems even more relevant. I wouldn't normally say that about a corporate communication but it is an unusual one.
Eventually we'll have some system to aggregate related urls that isn't so all-or-nothing.
Do you work in a larger company? This is crystal clear (if you know what to look for) vs. the usual generic communication that happens in larger companies around these types of changes...
This was rather clumsily written. Even if your company messed up, shoving your CEO with a boot up his ass is bad for morale. The reason why most communiques are generic is because there's very little upside to being abrupt publicly.
<<The reason why most communiques are generic is because there's very little upside to being abrupt publicly.>>
You are quite wrong, if anything, employees appreciate openness and decisiveness, vs. sweeping changes under the rug with generic language. There is actually a ton of upside to creating honest communication, but it's much harder than hiding behind empty phrases, which then builds a culture of speculation (of what "really happened"), politics, and distrust.
I have no idea what really happened behind the scenes and why exactly the new CEO used this language, but I can assure you that any email from David Sacks will not be clumsy, but very deliberate and written to achieve a specific purpose. (There is some speculation on earlier threads around of why it might have been written this way).
Not talking about employees. You can release whatever message you want internally. It's the external message where upside downside needs to be a consideration. By which I mean whatever you say in email can be printed and quoted. Disseminate the message not email
I both appreciate and agree with your point, but in this case I think the issues was that their new CEO had to assume that, given the high visibility of the company, whatever message he was going to send out to his internal team was also going to get leaked to the press.
If you are in that type of situation, you have to chose between your employees and external parties, and looks like he decided that creating a trusted relationships with his employees was more important...
What did you find well written about the culture? Genuinely curious, because I have the exact opposite view. The culture section is blatantly obvious and the new values don't seem to provide any guiding force. Pushing down decision making in the company (a point of his which I agree with) only works if the values you're pushing actually inform action. Which these don't.
> That might not be a bad thing. It could be precisely because it was inappropriate that Zenefits got ahead.
...for now. But if the end result is massive fines, plus a bunch of their sales staff (and maybe their superiors) getting thrown in prison under Washington's criminal laws relating to selling insurance without a brokers license, plus ruining the company's relationship with customers and with the insurers whose products it sells (and possible breach-of-contract actions from those insurers).
Well, then, getting ahead for a little while before the whole thing caught up to them isn't going to seem like a big advantage.
Conrad stepped down from the board as well. Here's hoping new leadership can bring the company in compliance and turn the trajectory of the company around.
What does this have to do with raising VC? Those kind of things happen at any large company. (Zenefits has over 1500 people on staff and growing rapidly.)
> 2. Play it up as a huge problem that could threaten the company.
It absolutely was a HUGE problem. Even if he was set up, Conrad created a toxic culture that had to change.
Parker never seemed to understand that he could not flout laws & regulations like Uber; Uber has leverage because consumers love their product, and is able to put pressure on the incumbents and regulators; in contrast, NOBODY would stand up to defend Zenefits, and regulators will shut them down unless they clean up their act asap.
Except that here, it really is a huge problem. There's nothing to "play up" when you're being formally investigated for a massive number of Class B felonies.
It kind of sounds like Zenefits is looking at some heavy (multi million dollar) fines, and they're trying to drive the narrative before fines and regulatory actions are announced.
This must be a really rough thing to go through, but I am sure Parker is doing what is best for the company at this time (whether it was forced on him or voluntary). Zenefits is the greatest thing to happen to SMB's in years, and I am excited to see it continue to grow.
Maybe Parker will make a triumphant Jack Dorsey-like return when the time is right. Or maybe he'll disrupt another multi-billion dollar industry. Whatever it is, smart people will follow him.
"Zenefits is the greatest thing to happen to SMB's in years"
Not sure about that. We tried working with Zenefits for our benefits and their agents screwed up so many times while trying to onboard our small team that we got alarmed and went with another provider (who ended up being a lot cheaper too).
It is my understanding that in order to get those lower price Trinet becomes the employer to your employees, therefore they can get a huge discount on group rates. However, your employees technically now work for Trinet, not your company. While perhaps ok at a small scale, as you grow, that's not exactly a great position to be in.
Previous company had the following in their contract:
TriNet Group, Inc. (“TriNet”): The Company’s payroll and other human resource management services are provided through TriNet, a
professional employer organization. This arrangement between the Company and TriNet means that TriNet will be considered your
employer of record for payroll and human resource management purposes and your managers here at the Company will be responsible for
directing your work, reviewing your performance, setting your schedule, and otherwise directing your work at the Company. This means
that the Company and TriNet are co-employers, and you are technically a “co-employee”. As a “co-employee” of TriNet, you will be
required to accept the policies and procedures set forth in TriNet’s Terms and Conditions Agreement (“TCA”).
More or less: income came from TriNet, insurance/benifits all came from TriNet, but I technically worked for $company.
However they spin it, technically you worked for TriNet. TriNet probably has some professional services agreement with your company that pays what it costs to employ you (salary, taxes, benefits), but your W2 says TriNet.
Through this co-employment, TriNet becomes the employer of record for the 314,000+ employees of its 12,000+ clients (as of 9/30/15).
Because this co-employment gives a PEO significant scale, the PEO can offer its clients services/rates that a smaller company with less employees can never access.
In addition, through the co-employment model, a PEO also has 'skin in the game' with compliance issues, because everything is reported under their FEIN number.
Hope this helps. Happy to explain more or give you additional (independent) resources. jock.breitwieser AT trinet DOT com
We ended up going with Trinet as well after looking at them. If you look what Zenefits is really doing, they appear to be just another rent seeker - their entire goal seemed to be to get you to use their software, and in exchange become the insurance agent of record vs. cutting the actual cost of the insurance.
> Zenefits’ company values were forged at a time when the emphasis was on discovering a new market, and the company did that brilliantly. Now we have moved into a new phase of delivering at scale and needing to win the trust of customers, regulators, and other stakeholders.
i.e., they valued growth over integrity and following the letter of the law. That evidently works for some startups some of the time, but this seems like a bad industry to try that approach in.
I read somewhere that if the new guy writes the memo, it means the old one was fired. If the old guy writes a goodbye, it means he's actually stepping down.
It seems Parker was fired, and not 'stepping down'.
Even if he resigned, he resigned under duress. This wasn't an "I'm spending time with my family and kids" resignation/firing; it was a "oh shit we're screwed, we need to mitigate the damage and throw Parker under the bus to save the company". It's very likely he was a big part of the resignation discussions.
Doesn't "throw[ing someone] under the bus" imply they're not completely at fault? This was not an honest mistake or some above-board disruption of an existing industry.
This was someone willfully, knowingly committing many (hundreds? thousands?) of felonies in the interest of making money and growing the company.
It can also mean (and, IME, usually means) that the person recieving the blame was at fault but that the people doing the blaming are also substantially at fault for the same offense, and are deflecting the blame to a particular target as a scapegoat.
Where do you get "willingly, knowingly committing . . . felonies in the interest of making money . . ."? That's not what any of the articles say.
Inadequate process controls means employees were supposed to follow the law but things slipped through the cracks sometimes. Seems that happened a lot in Washington. But I'm pretty sure most of Zenefits' business is in CA. I would assume the brokers for most sales were licensed properly.
In a memo to employees about the management change, Sachs didn’t dance around the company’s issues when it comes to regulatory compliance.
“The fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Parker has resigned,” writes Sachs. “In order for us to move forward as a company, we cannot seek to hide or downplay the problem.”
I agree with the sentiment, but probably a more accurate and slightly less bold claim is that the old guy getting a chance to speak means the change was amicable.
He was definitely fired. Just look at few factors:
* There is basically 0 credit given to the Conrad (the company's founder) in the memo. That's likely because this was a fight and not a mutual decision.
* He's giving up his board seat. When it's merely a case of needing a new CEO, you don't necessarily lose your board seat.
Ohhhh I would be fascinated to see a RICO case against YC for every startup they've funded that's broken laws. That seems entirely in the spirit of RICO, the more I think about it: it's specifically about organizations that make money off of other people breaking the law at their direction, and who might otherwise avoid liability because they themselves didn't break the law.
RICO cases are limited to a small number of serious crimes, like kidnapping, extortion, arson, drug trafficking, and so on. They don't cover breaking insurance regulations.
> RICO cases are limited to a small number of serious crimes, like kidnapping, extortion, arson, drug trafficking, and so on.
Mail and wire fraud, which can include pretty much any knowing misrepresentation for commercial gain using the covered media, are among the predicate acts for RICO, along with the offenses you list.
So, it may not be as far out as you seem to think to imagine RICO applying.
Also, apparently holding Magic: The Gathering tournaments where ante is allowed falls under RICO. Sponsoring underage gambling. I recall that being used as the reason why none of the major tournaments used the ante rule - they were all afraid of being prosecuted as racketeers.
you don't seem to believe in the concept of punishment must fit the crime? There are fines for breaking certain regulations. There is a reason they are just fines and not beheadings.
you mentioned your desire to inflict disproportionate punishment. I am pointing out that there is a reason fines are levied as opposed to more severe punishments, in case of certain violations.
also, I did not say that you mentioned beheadings. I mentioned beheadings to illustrate a point.
"Effective immediately, this company’s values are:
#1 Operate with integrity.
#2 Put the customer first.
#3 Make this a great place to work for employees."
I don't agree. What happens if the customer tries to force you to do something that compromises your integrity as seen by other customers and regulators?
It's a joke on saying "Put the customer first" as the second item in your priorities. "Put the customer after integrity, but before all that other stuff" doesn't roll off the tongue as well.
I love the way Conrad gets all the blame and is thrown under the bus...
'The fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Parker has resigned.'
Not much subtlety there. Presumably as COO he had nothing to do with 'internal processes, controls, and actions around compliance' which seems a little odd to me. So what was he doing all day then?
I also like how the company values are instantly changed...
'Effective immediately, this company’s values are: ...'
Which is interesting because most companies spend ages coming up with the correct values for the company and it usually involves feedback from employees.
David Sacks joined Zenefits about 13 months ago, so I presume while as COO he is somewhat responsible, it seems far more likely his opinions being different from Conrad is what led to Conrard's removal.
This is a great question, especially since it seems like he would have been in charge of the salesforce (where a lot of these issues happened).
So unless he wanted to change these processes and Parker stopped him, it does feel like there is another side to this story... (modulo many of the other issues that must of driven this change)
<<Which is interesting because most companies spend ages coming up with the correct values for the company and it usually involves feedback from employees.
>>
"Operate with integrity", "put the customer first", and "make this a great place to work for employees" seem like pretty generic / good values (that are probably based on a lot of experience Sacks has from Yammer).
The fact that they are called out in this email seems pretty telling of why Parker had to go...
Responsibility ends with the CEO. If you're the CEO your job is to make sure things don't go wrong and take the dive under the bus if you let things get bad enough that its required.
As a former Zenefits user, and after contentiously conversing with Parker a few times on social media then soonthereafter reading how the company flouts laws and regulations while feigning simple ignorance of them, I'd say the buck certainly stops with him.
He needed to finally accept that his company has some serious internal issues that have cost a not-unsubstantial amount of people a lot of time, money and grief over the years, including some of my own employees. The company certainly has a lot of promise, but was managed the wrong way from day 1 and it needs someone with some real experience to right the ship if they are to stay viable.
The issues go far beyond insurance. The whole platform was a mess when my company used it and support was virtually non-existent because of their complete ineptitude.
"But what the former chief operating officer didn’t acknowledge is that for a long period of time he and Mr. Conrad worked closely together, sitting next to each other at work and meeting regularly for dinner, according to a person familiar with the matter.
The person said that Mr. Sacks, who describes himself in his Twitter profile as a “hypergrowth addict,” helped spearhead the company’s large fundraising shortly after joining the company in December 2014 as well as its strategy to grow quickly despite a lack of internal controls and processes."
Does anybody think that writing down company values has any effect on anything ever? This is what people do to go through the motions of leadership when they have no clue what their employees actually do.
Right. So sick of that dumb shit. Anyone gullible enough to buy into propaganda like that is too stupid to hire, imo. I havent worked anywhere whereupon hearing mission statement oriented bullshit from the ceo or minions that I didnt say to myself, "ok...whatever...".
Whenever a major organization develops a new system as an official standard for "X", the primary result is the widespread adoption of some simpler system as a de facto standard for X...
Maybe I'm unlucky, but I've never seen a company where this is true, if they are > 5 people. And those were non-profits where growth wasn't really a concern.
TBH, I knew a number of folks within Google Search who took "Don't be evil" very seriously. I dunno about the top-level execs, but there were plenty of folks with mid-level VP or Director titles who cared deeply about the user experience and doing right by users.
Looks like the WSJ article has some additional information, including this rather telling quote about the current company values, which seem rather different than the set of values Sacks espouses:
<<Mr. Conrad, 35 years old, is known for his brash style and the company’s operations reflected that. His company’s mantra — “ready, fire, aim” — is followed by many Silicon Valley startups meant to encourage aggressiveness.
Such a cavalier approach often works well for tech companies, such as Facebook Inc., whose motto in the past was famously “move fast and break things.” But it may have served Zenefits poorly as it operated in the regulated insurance industry.>>
Over the long run there are an infinite number of thing to "break", or "disrupt"...you'd better have a solid product when you attempt to fill the void you've created...
The analogy of conquering armies pushing forward and failing to nail down resupply lines comes to mind...
In football it's called out kicking your coverage...
Hypergrowth is not necessarily an evil, but the old maxim "cover your flanks" is generally apt...
If he were indeed following the "move fast and break things" mantra, then i guess someone should have warned him that doesn't include things like.. the law.
I assumed that meant "products", as in 132 unique insurance products, rather than 132 belly buttons insured (phraseology in the health insurance industry).
Trying to operate an Uber/AirBnB style ignoring of regulations can work when you're dealing with hundreds of small time, underfunded municipal governments. But when your regulators are federal and state level you have to straighten the ship real quick if the eye of Sauron looks your way.
True, but that's taking a very "realpolitik" attitude toward it.
What about the fact that breaking the law is (often) morally wrong in its own right? Even if you disagree with the law, I don't want to live in a place where laws are toothless and optionally followed; the side effects of such lawlessness would be horrible, and huge.
This whole thing really got me thinking about how we in SV/SF think about laws and their enforcement. It might sound a little mean, but I almost hope they make an example out of Parker Conrad and Zenefits to nudge the pendulum of VC-funded companies a bit back toward respect for laws and compliance, rather than this "fuck it, they won't enforce it and if they do, we'll just have our well-connected VC partner make an off-record call to the governor/senator/regulator and magic it away" that seems so common today. All in the name of GROWTH.
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[ 5.6 ms ] story [ 150 ms ] threadUSA Today reporter > https://twitter.com/jguynn/status/696847880921833473
Fortune reporter > https://twitter.com/eringriffith/status/696847400456097792
It's not particularly hard to get licensed (usually around $100, a training course of 40-100 hours (which they are large enough, they could set up inhouse), and possibly fingerprinting). Is it a hassle to get licenses in multiple states? Yeah--though most states honor other state's licenses, and just require the fee then.
In any case, this is table stakes--and if they can't get this basic aspect right (after being warned for years!) how well do you think they manage the tricky stuff? And why aren't they hiring experienced health brokers in the first place?
(The stuff about illegal rebates because they give away their software is garbage though. I'm 100% on their side for that.)
I'm curious because there must be something obvious I'm missing.
Do you feel drivers should have to get a drivers licenses? I hope you don't think Uber should just hire people off the street and put them in cars without proper licenses.
A simple health example off the top of my head - you sell health insurance to someone without understanding the product because you're so keen to 'make the sale'. Meanwhile you promised the buyer it would cover that heart condition he has when in fact you have no idea that it doesn't. A couple years later he needs heart surgery and finds out the plan he's been paying into doesn't cover his condition and now he cannot work to provide for his family, nor can he get treatment to get better.
That argument is about as valuable as "think of the children."
> Do you feel drivers should have to get a drivers licenses?
That's not the right analogy. The equivalent would be requiring special licenses for all car dealership employees, which is not required. Salespeople aren't themselves doing anything medical and there's no reason they should have additional requirements beyond normal salespeople. We already have laws covering both (a) fraud, (b) minimum requirements of healthcare plans.
> A simple health example off the top of my head
Existing consumer protection laws would cover this. You can't sell a product and claim it has a feature which it doesn't — that's fraud.
Nothing about health insurance should mean that salespeople should require licensing. It's pure rent-seeking. There are plenty of other dangerous things which are sold by salespeople without licenses.
The lady in this example is clearly not competent, and should not be selling products that people depend on for their health.
Not sure why you feel having gone through the hoops to demonstrate competence, learn about the various products, and how to advise clients of their options is merely 'rent seeking'.
---
"I made like $15,000 in the time I was there, just on commissions. And I never got my license," said an insurance salesperson who left Zenefits this summer. She estimated she had more than 100 conversations with different customers about insurance. "I took my test three times in a row, and I failed. They still let me work."
Without her license, she had to improvise on calls with customers.
When faced with a tricky question, "I would just google it,” she said. She would tell the customer, "Hold on one second, let me email the expert, he's on the line, hold on one second, I'll get back to you.” But in reality, “I would pick one of the first three links and I would just go off of that."
http://www.buzzfeed.com/williamalden/zenefits-under-scrutiny...
I deal with incompetence on a daily basis. Everyone from banks to airlines have incompetent employees, and we're not demanding that all customer support agents undergo licensing requirements. We live in a free market and the best way to deal with incompetence is the market. (Ex. I switched my bank after getting frustrated with incompetent tellers.)
Once again: the worst that an insurance salesperson can do is sell you bad insurance. They're not actually involved in medical procedures, so any harm they can do is financial. And if that harm is due to fraud (misrepresenting a product to you), you have legal remedies. Bank customer support people have just as much potential to cause financial harm, but we don't require them to be licensed.
Even more to the point: I can personally sign up for insurance directly on the internet, without talking to any licensed salesperson. If licenses salespeople are so essential to insurance, why can I buy insurance without interacting with one?
As far as I'm concerned, the only professions which should require government licensing are those where tort is insufficient to correct wrongs. (ie. someone can die: doctors, civil engineers, etc.)
Sorry, there are very clear knock-on health effects here you're sweeping under the rug. Eg, if you're expecting to be covered for an urgent emergency life-saving procedure. Maybe you personally have sufficient cash on hand to pay for any required emergency surgery, that doesn't mean it's just a 'financial' problem to everybody else.
Do you really think it's appropriate to have someone be denied a medical procedure, and hope they survive so they can go through a legal challenge afterwards for 'fraud', and hope they can successfully provide proof of fraud over incompetence based on some phone conversation several years ago?
Instead of the much simpler solution of requiring some minimum license for the insurance seller?
I'm not sure about your online purchase example. Are you 100% sure these are the same insurance products requiring licenses as mentioned in the article, that no human sanity checks the product during the purchase process, or that the online algorithm itself didn't go through a sufficient license-compliant certification process?
You will never be refused emergency treatment just because your insurance doesn't cover it. That's the law in the United States.
You will get a huge bill afterwards and there will absolutely be financial consequences, but not medical ones.
It's illegal for a hospital ER to refuse you due to lack of sufficient insurance. The point is that you won't die, so you will be around to come back and sue the broker. (In fact, insurance lawsuits are super common.)
Not to mention that we're dealing with a hypothetical case where you do actually have insurance but it's somehow insufficient (which, by the way, is unlikely under Obamacare). In that case, you would absolutely get treated, but your insurer would refuse to cover the bill and would pass it on to you. You could then sue Zenefits for misrepresenting the product and seek damages to cover the bill.
> same insurance products requiring licenses as mentioned in the article
They're not the same in that I'm talking about individual insurance and the article is group insurance, but that's irrelevant to the point. If there are serious medical consequences to buying insurance without licensed supervision, I shouldn't be able to buy my own insurance online.
This happens all of the time, people cannot go see a doctor or receive a medication because of an insurance goof up. And then they have to wait. And wait. And legal remedies are not guaranteed to solve the problem, and such remedies should not be relied upon as a fallback for untrained insurance salespeople.
What exactly are you trying to convince us of? That insurance sales should be have no licensing requirements? And you're hinging your argument on the fact that it is "financial" and not "health" related (which like I said above is not true). In that case are you also in support of getting rid of licensing and other regulations in the banking and finance industry?
The law you're citing -- EMTALA -- merely requires hospitals to stabilize patients.
Yes, and that's what's necessary in an "urgent emergency."
That's it, huh? Just financial? Only, you might get stuck holding the bag for a bunch of medical bills that aren't covered by some insurance policy you bought, so you get to spend your sick days fighting a legal battle against a company you might never be able to recover a cent from.
>"Bank customer support people have just as much"
Completely ignorant.
What part of that is not financial?
> Completely ignorant.
Is there a licensing requirement for bank CS representatives that I'm somehow not aware of?
Ad hominem attacks are not an acceptable form of argument on HN.
Providing insurance advice is the same as financial planning, mortgages, investments and any of a number of professions that are all licenced by the state. The reason for these licences is because not having them creates a wealth of misinformation that can (and historically has) resulted in massive amount of fraud and theft from consumers, because - like you - they generally aren't knowledgeable enough to be able to discern a difference of professional opinion from someone selling snake oil.
A licence is a minimum requirement to show to everyone that you have grasped the basic concepts and rules surrounding the product you are advising others on. It does some other things as well, like ensure you have proper E&O insurance and stay up to date with changing legislation, but that isn't its primary purpose.
Licencing is a form of consumer protection. End of story. Arguing that it isn't necessary and/or consumers in these industries don't need protection to counter their ignorance (which is the entire reason they are buying advice in the first place) is naive almost to the point of being moronic.
I hear that it was compliance-related, and that Zenefits is holding a mandatory all-hands right now for all employees. Peter Thiel also joined their board.
The buzzfeed article cited elsewhere in the thread goes into to details on at least one of the major compliance problems: most of their policies in Washington State -- which has rather strict, including potential prison sentences, rules on this -- were apparently sold by unlicensed brokers, in violation of both the law of the State and Zenefits contracts with insurers.
http://www.buzzfeed.com/williamalden/80-of-zenefits-deals-in...
Eventually we'll have some system to aggregate related urls that isn't so all-or-nothing.
You are quite wrong, if anything, employees appreciate openness and decisiveness, vs. sweeping changes under the rug with generic language. There is actually a ton of upside to creating honest communication, but it's much harder than hiding behind empty phrases, which then builds a culture of speculation (of what "really happened"), politics, and distrust.
I have no idea what really happened behind the scenes and why exactly the new CEO used this language, but I can assure you that any email from David Sacks will not be clumsy, but very deliberate and written to achieve a specific purpose. (There is some speculation on earlier threads around of why it might have been written this way).
If you are in that type of situation, you have to chose between your employees and external parties, and looks like he decided that creating a trusted relationships with his employees was more important...
"Effective immediately, this company’s values are: ..."
That might not be a bad thing. It could be precisely because it was inappropriate that Zenefits got ahead.
...for now. But if the end result is massive fines, plus a bunch of their sales staff (and maybe their superiors) getting thrown in prison under Washington's criminal laws relating to selling insurance without a brokers license, plus ruining the company's relationship with customers and with the insurers whose products it sells (and possible breach-of-contract actions from those insurers).
Well, then, getting ahead for a little while before the whole thing caught up to them isn't going to seem like a big advantage.
> Zenefits also removed Conrad from its board of directors, while adding three prominent investors, according to an announcement on Monday.
This might not be a bad thing. It could be precisely because it was inappropriate that Zenefits got where it is today.
1. Wait for a misstep by the current leader.
2. Play it up as a huge problem that could threaten the company.
3. Suggest that maybe someone else could do better.
It absolutely was a HUGE problem. Even if he was set up, Conrad created a toxic culture that had to change.
Parker never seemed to understand that he could not flout laws & regulations like Uber; Uber has leverage because consumers love their product, and is able to put pressure on the incumbents and regulators; in contrast, NOBODY would stand up to defend Zenefits, and regulators will shut them down unless they clean up their act asap.
Edit: fixed typo (thanks @gingerrr)
http://fortune.com/2015/04/13/zenefits-utah-ban-insurance/
http://techcrunch.com/2015/11/25/zenefits-under-investigatio...
Maybe Parker will make a triumphant Jack Dorsey-like return when the time is right. Or maybe he'll disrupt another multi-billion dollar industry. Whatever it is, smart people will follow him.
* disclaimer: I am a very happy Zenefits customer
Not sure about that. We tried working with Zenefits for our benefits and their agents screwed up so many times while trying to onboard our small team that we got alarmed and went with another provider (who ended up being a lot cheaper too).
Previous company had the following in their contract:
More or less: income came from TriNet, insurance/benifits all came from TriNet, but I technically worked for $company.TriNet is a Professional Employer Organization (PEO). As a PEO, we enter into a so-called co-employment with our clients.
Here's an overview: https://en.wikipedia.org/wiki/Professional_employer_organiza... http://www.trinet.com/company/news_and_press/resources/peo_f...
Through this co-employment, TriNet becomes the employer of record for the 314,000+ employees of its 12,000+ clients (as of 9/30/15).
Because this co-employment gives a PEO significant scale, the PEO can offer its clients services/rates that a smaller company with less employees can never access.
In addition, through the co-employment model, a PEO also has 'skin in the game' with compliance issues, because everything is reported under their FEIN number.
Hope this helps. Happy to explain more or give you additional (independent) resources. jock.breitwieser AT trinet DOT com
> Zenefits’ company values were forged at a time when the emphasis was on discovering a new market, and the company did that brilliantly. Now we have moved into a new phase of delivering at scale and needing to win the trust of customers, regulators, and other stakeholders.
i.e., they valued growth over integrity and following the letter of the law. That evidently works for some startups some of the time, but this seems like a bad industry to try that approach in.
It seems Parker was fired, and not 'stepping down'.
This was someone willfully, knowingly committing many (hundreds? thousands?) of felonies in the interest of making money and growing the company.
Inadequate process controls means employees were supposed to follow the law but things slipped through the cracks sometimes. Seems that happened a lot in Washington. But I'm pretty sure most of Zenefits' business is in CA. I would assume the brokers for most sales were licensed properly.
In a memo to employees about the management change, Sachs didn’t dance around the company’s issues when it comes to regulatory compliance.
“The fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Parker has resigned,” writes Sachs. “In order for us to move forward as a company, we cannot seek to hide or downplay the problem.”
http://fortune.com/2016/02/08/zenefits-parker-conrad-resigns...
* There is basically 0 credit given to the Conrad (the company's founder) in the memo. That's likely because this was a fight and not a mutual decision.
* He's giving up his board seat. When it's merely a case of needing a new CEO, you don't necessarily lose your board seat.
-says someone who doesn't know much but can spot obvious trends.
https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corru...
Mail and wire fraud, which can include pretty much any knowing misrepresentation for commercial gain using the covered media, are among the predicate acts for RICO, along with the offenses you list.
So, it may not be as far out as you seem to think to imagine RICO applying.
ianal
Interestingly, "criminal copyright infringement" also somehow got on the list of RICO predicate offenses. Guess someone had a good lobbyist...
There are quite a few interesting undeveloped analogies across the greater hip hop industry vs. startups.
also, I did not say that you mentioned beheadings. I mentioned beheadings to illustrate a point.
Ummm… what were the values before the switch?!?
2. Make more money
3. Make so much money
1. Survive until next year 2. Survive until exit
https://www.youtube.com/watch?v=W2firijxQOo
#2 - Put the customer first (except when listing our core values, then put them second).
I understand the sentiment, just a weird juxtaposition with "#2" and "first"
#1 Operate with integrity. -> don't go to jail.
#2 Put the customer first. -> stop swindling customers.
'The fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Parker has resigned.'
Not much subtlety there. Presumably as COO he had nothing to do with 'internal processes, controls, and actions around compliance' which seems a little odd to me. So what was he doing all day then?
I also like how the company values are instantly changed...
'Effective immediately, this company’s values are: ...'
Which is interesting because most companies spend ages coming up with the correct values for the company and it usually involves feedback from employees.
So unless he wanted to change these processes and Parker stopped him, it does feel like there is another side to this story... (modulo many of the other issues that must of driven this change)
"Operate with integrity", "put the customer first", and "make this a great place to work for employees" seem like pretty generic / good values (that are probably based on a lot of experience Sacks has from Yammer).
The fact that they are called out in this email seems pretty telling of why Parker had to go...
He needed to finally accept that his company has some serious internal issues that have cost a not-unsubstantial amount of people a lot of time, money and grief over the years, including some of my own employees. The company certainly has a lot of promise, but was managed the wrong way from day 1 and it needs someone with some real experience to right the ship if they are to stay viable.
"But what the former chief operating officer didn’t acknowledge is that for a long period of time he and Mr. Conrad worked closely together, sitting next to each other at work and meeting regularly for dinner, according to a person familiar with the matter.
The person said that Mr. Sacks, who describes himself in his Twitter profile as a “hypergrowth addict,” helped spearhead the company’s large fundraising shortly after joining the company in December 2014 as well as its strategy to grow quickly despite a lack of internal controls and processes."
http://blogs.wsj.com/digits/2016/02/08/zenefits-ceo-parker-c...
Whenever a major organization develops a new system as an official standard for "X", the primary result is the widespread adoption of some simpler system as a de facto standard for X...
Your point is worth considering...
"Starting with the upcoming August review, every employee will have a formal discussion of how they are doing on values with their managers."
shiver
http://www.crn.com/news/channel-programs/18828507/ballmer-mi...
<<Mr. Conrad, 35 years old, is known for his brash style and the company’s operations reflected that. His company’s mantra — “ready, fire, aim” — is followed by many Silicon Valley startups meant to encourage aggressiveness.
Such a cavalier approach often works well for tech companies, such as Facebook Inc., whose motto in the past was famously “move fast and break things.” But it may have served Zenefits poorly as it operated in the regulated insurance industry.>>
http://blogs.wsj.com/digits/2016/02/08/zenefits-ceo-parker-c...
The analogy of conquering armies pushing forward and failing to nail down resupply lines comes to mind...
In football it's called out kicking your coverage...
Hypergrowth is not necessarily an evil, but the old maxim "cover your flanks" is generally apt...
Business is war...
A pretty big clue, of the "writing in the sky with fire" variety.
Is that really all they sold? Utah had pretty dismissal numbers as well. How did they get to multiple billion valuation?
They "signed up" 10,000 companies as of a year ago[1]...but I'm not sure how many of those they sold health insurance to!
[1] http://www.siliconbeat.com/2015/01/15/zenefits-releases-grow...
What about the fact that breaking the law is (often) morally wrong in its own right? Even if you disagree with the law, I don't want to live in a place where laws are toothless and optionally followed; the side effects of such lawlessness would be horrible, and huge.
This whole thing really got me thinking about how we in SV/SF think about laws and their enforcement. It might sound a little mean, but I almost hope they make an example out of Parker Conrad and Zenefits to nudge the pendulum of VC-funded companies a bit back toward respect for laws and compliance, rather than this "fuck it, they won't enforce it and if they do, we'll just have our well-connected VC partner make an off-record call to the governor/senator/regulator and magic it away" that seems so common today. All in the name of GROWTH.