SaaS Powered BPO

Jeff Kaplan writes an insightful blog on trends in IT services with a strong focus on SaaS technologies which I’ve subscribed to for some time.  This morning I found myself dancing a little jig when I discovered his most recent post “SaaS and Business Processing Outsourcing Converging,” because this is exactly what we’re doing at COCO Development.  I’ve touched on our business model in some of my previous posts, but I’d like to focus here specifically on how and why we’ve built our company to leverage a SaaS delivered application to provide business process outsourcing (BPO) services for our customers.

Background

Every US employer with 20 or more employees who sponsors a group health plan must comply with COBRA.  The law impacts about 650,000 US employers and their greater than 90 million employees.  Essentially, COBRA allows employees or their dependents who lose their health insurance due to one of several qualifying events to continue to remain on the employer’s group health plan for an extended period of time.  Because of (a) the complexity of the regulations, (b) the need to collect monthly premium payments from COBRA continuants, and (c) the burden of communicating regularly with the COBRA continuants, approximately 72% of employers outsource their COBRA compliance administration to a third-party administrator (TPA).  For the TPA, however, these challenges still exist, and are multiplied as the TPA tries to scale their business.  This is why no single COBRA TPA currently has a greater than 4% market share.  We know this from first hand experience, as our founder and CEO, John Jenkins, built the nation’s largest independent COBRA administrator, COBRA Outsourcing Company, before selling COBRA Outsourcing and founding COCO Development to revolutionize this market.

The Problem

We know from personal experience the pains in trying to scale a COBRA administration business. 

(1)The incumbent technology “solutions” on the market are outdated client/server systems with either (a) no web portal at all or (b) a kluged browser based GUI built on top of a 15 to 2o year old legacy system.  This means the bulk of the communication taking place today between the TPA and the employer and the TPA and the COBRA continuant is done by phone, fax, and email — requiring the TPA to maintain a large and costly call center and resulting in much duplication of effort and manual data entry errors.

(2)COBRA continuants pay about $24B USD per year in monthly continuation premium payments.  The vast, vast majority of these payments are made by personal check.  Furthermore, the COBRA regulations impose very specific rules governing whether payments are made in a timely manner to continue receiving coverage.  The postmark date of mailed payments is critical in determining their timeliness.  For this reason, COBRA TPAs cannot reliably depend on a traditional bank lockbox service to process these payments since no bank lockbox will integrate with the TPA’s COBRA system to check to see whether a payment is timely before depositing the check.  The result is that most COBRA TPAs hand open, hand enter, and hand endorse and deposit premium payments.

(3)Administering COBRA requires the generation and delivery of multiple pieces of formal, written communication with COBRA participants.  To date, the US courts have held that the only universally approved method for delivering this communication is via first class mail.  A fair sized TPA may generate a thousand or more letters a day, and this is with a smaller than 4% market share.  Unfortunately, the legacy COBRA systems on the market have no concept of optimizing their production of letters for use by a mail house, so most TPAs hand fold, stuff, meter, and sort their mail before hand delivering it to the post office.

SaaS Powered BPO

Communication, payment processing, and mail fulfillment – we solve all of these pain points through SaaS powered BPO services.

(1) COBRApoint is our SaaS delivered enterprise application for COBRA (and retiree)administration with unique, secure portals for the administrator, the employer, and the member (COBRA or retiree continuant).  All stakeholders have instant access to the data they need and the ability to communicate new information directly to the system of record.  Duplication of effort, manual errors, and call center volume are reduced significantly (we probably save a few trees too).

(2) COCO Payment Services provides a COBRA optimized (postmark date driven) payment processing lockbox service which is integrated directly with COBRApoint.  It is this direct integration with the SaaS system which makes the service valuable.  The fact that we can also accept credit/debit and ACH transactions through the COBRApoint Member Portal is another distinct benefit of an integrated BPO service and a SaaS application.

(3) COCO Mail Services automatically electronically delivers highly optimized letter files generated by COBRApoint directly to our mail house each business day.  In other words, when our customers perform an action in the SaaS COBRApoint system on Monday which triggers a letter, this letter is placed into the USPS mail stream on Tuesday without the customer having to do a thing.  In addition, the costs our customers pay for this service are far less than any TPA is paying currently due to economies of scale across our customer base.

So, why do we call our business model SaaS Powered BPO Services?  First, COBRApoint’s SaaS delivery model is what enables us to provide our BPO services.  If each of our customers were running their own local copy of the system behind their own firewalls, we could never efficiently provide our BPO services.  Secondly, while a web based, scalable enterprise application would revolutionize this $24B market on its own, it is our BPO services which dramatically impact our customers’ bottom line.  The efficiencies we drive through highly optimized automated processes and economies of scale empower us to provide these highly repetitive services for our customers at a fraction of the cost they are paying currently.  For these reasons, the BPO services are all our customers pay for — COBRApoint is free.