Republican Crony Capitalists In Utah Go After Insurance Startup
The notion that the Republicans are the party of free enterprise is a pantload. They just tend to be more so than the Democrats -- and as long as nobody well-established and well-funded is complaining about some upstart disrupting how things have been done.

Patrick Gleason writes at Forbes about Zenefits, a SF-based startup launched in 2013:

As TechCrunch describes it, Zenefits helps businesses by providing "a cloud-based dashboard to HR departments designed to help small businesses manage hiring, termination and all the benefits and payroll details necessary in-between those events." Zenefits also connects companies with health insurance providers.

This cutting edge startup has experienced great success early on in large part because, as the aforementioned TechCrunch article points out, Zenefits "makes it just that much easier to manage the insurance piece once a business has authorized the company as its broker. And, as a result, more traditional insurance brokers are finding it difficult to compete with the company's business model."

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.

AEI's Mark J. Perry writes:

It's classic government-enforced protectionism that protects existing, incumbent high-cost industries from the competition of efficient, low-cost startup rivals. And it's also a classic case of "regulatory capture" defined here as:

The process by which regulatory agencies eventually come to be dominated by the very industries they were charged with regulating. Regulatory capture happens when a regulatory agency, formed to act in the public's interest, eventually acts in ways that benefit the industry it is supposed to be regulating, rather than the public.

This is a perfect opportunity to invoke the timeless wisdom of French economist Frederic Bastiat, who wrote this in 1850 four days before his death:

Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.

Regrettably, Utah Insurance Commissioner Kiser has ruled against the interests of the human race and the citizens and businesses of Utah in favor of an entrenched special interest group, to the great overall detriment of his state. Hopefully, Governor Herbert will side with the public interest and with Bastiat.

via @againstcronycap