Forbes Slams Utah ‘Crony Capitalism’

Contributor Patrick Gleason says Utah insurance brokers are using the power of the state to unfairly target Zenefits, a San Francisco-based startup that connects companies with health insurance providers.

Writes Gleason:

Utah’s traditional insurance brokerage community is none too pleased about having to compete with Zenefits. On November 20, Utah Insurance Commissioner Todd Kiser sent a letter to Zenefits, informing the company that it is violating Utah inducement and rebating laws because it offers its software for free. Kiser said the company should be assessed $5,000 for each violation and twice the profit generated per violation. Because of this, Zenefits would currently be on the hook for at $97,000 penalty.

Kiser told Zenefits that it could come into compliance with state law by raising prices and ceasing to advertise. Zenefits does not charge businesses for their software, but they generate a profit from commission paid by the insurance providers with which they connect their clients. Zenefits understandably does not wish to go along with Kiser’s orders. It’s worth noting that Commissioner Kiser was an insurance broker for 25 years prior to being elected to the state legislature. Kiser’s dictate, at the expense of small businesses, will protect brick-and-mortar brokerages like the one he used to run. He even said, in his own words, “the ease of using Zenefits” is part of the reason why he went after them.

So in Utah, it’s apparently a bad thing for a new company to make it easier for employers to operate their business. That’s an odd approach and one that won’t help the state market itself to companies looking to move to and create jobs in Utah. It’s also at odds with Utah Gov. Gary Herbert’s stated commitment to foster and support tech innovation in the state. Other states have smartly welcomed Zenefits.