Fresh out of Y Combinator’s most recent accelerator class comes a health technology company that wants to make finding and managing health plans less of a pain for small businesses.
Zenefits, in essence, acts like a virtual health insurance broker and human resources employee. Co-founder Parker Conrad, a former product manager at Amgen, had also previously founded two finance-focused startups: Wikinvest and SigFig, a digital investment portfolio management platform. As a small business owner, he saw a big problem with how health plans were being managed.
“That entire industry is stuck in the 1980s, with fax machines and paper forms and PDFs,” he said. “It’s a headache for businesses.”
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Conrad and co-founder Laks Srini, a former software developer at SigFig, created Zenefits to make the process simpler, starting with quoting. Instead of going through a broker and waiting a few days to get quotes for a few plans, companies using Zenefits get quotes online. “We automatically get you quotes immediately, and we do it for every health insurance plan in California,” Conrad said. Then employers can filter and compare plans, and see which one Zenefits recommends based on the employer’s data.
When it comes time to set up the plan, employee enrollment happens entirely online. Zenefits works with insurance companies as if it were a regular broker, so it’s no extra hassle to them. “On the back end, we’re actually creating these PDF forms that then get faxed into the insurance companies, so that they receive the documents the way they’re set up to receive them,” he said.
If an employer opts to let Zenefits connect to its payroll system, the software will also automatically do some of the tasks traditionally done by the HR department, like updating the payroll system when an employee makes changes to her health plan, or reaching out to a new employee who enrolls in the plan for the first time.
Zenefits launched in February and Conrad said it’s been growing about 40 percent week over week, with a client base of about 40 companies right now. It’s been operating with funding from Y Combinator and about $300,000 in additional investments from some of the Y Combinator partners.
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The challenge now is scaling up. After launching, Conrad said, the team discovered that about 90 percent of people coming to the site were coming from outside of California. “The biggest opportunity for us now is going to be adding all 50 states,” he said.
In the process, it’s also going to have to fend off competition from companies like Benefitfocus and Bloom Health, in addition to overcoming the challenges of having small businesses as customers. It’s a tough time for that crowd right now in the way of providing health coverage to their employees. In 2012, only six in 10 small businesses did so, according to the most recent Kaiser Family Foundation Employee Health Benefits survey. But the Patient Protection and Affordable Care Act created some incentives, like a small business health care tax credit and participation in health insurance exchanges (although the full rollout of these was just delayed), for companies to continue offering those benefits despite the growing price tag they bear.
