The Utah Insurance Department has informed an online Human Resources service company, called Zenefits, that the manner in which it offers its products violates state law. The decision has the small business community in an uproar and has even caused Governor Gary Herbert to respond.
Zenefits is an online company based in San Francisco that offers free HR services, such as managing benefits and payroll. They are also a licensed health insurance broker, and as such, receive commissions from customers who decide to use them in that capacity. In a letter sent to Zenefits on November 20, Utah Insurance Department Commissioner Todd Kiser says that model is illegal in Utah because health insurance brokers are not allowed to offer rebates or other free services as an incentive. But Zenefits CEO and co-founder Parker Conrad insists that what they offer isn’t a rebate.
“You can’t say that what we’re doing is rebating," he says. "What we’re doing is we’re providing a lot of free services to businesses, but we provide those regardless of whether they make us their broker.”
Zenefits has stopped taking new customers from Utah and company officials hope that Governor Gary Herbert will step in to make the insurance commissioner reverse his decision.
But Herbert’s spokesman Marty Carpenter says, while the Governor’s office is very concerned about the issue, finding a good balanced solution will take time.
“Certainly we feel like we’re being responsive," Carpenter says. "We certainly understand better the issue today than we did yesterday and we’re working toward coming up with a good resolution. But, do things happen quite as quickly in government as they perhaps do on the internet? Unfortunately, no.”
Carpenter also noted that there is no reason for the company to stop operating in the state as no official action has been taken against them. He also says the Governor hopes to be able to work with all stakeholders to find a solution during the coming legislative session.