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Charleston tech firm's collection of millions of Americans’ data now key to its business

Benefitfocus

Benefitfocus says it stores five petabytes' worth of consumer data. The firm then uses that data to reach out to the consumers that select benefits on its platform. File/Brad Nettles/Staff

A company that started out 20 years ago to help workers enroll in their benefits programs online says collecting and leveraging data on millions of Americans is now a core part of its business.

Daniel Island-based Benefitfocus Inc., which releases its quarterly and year-end financial results Tuesday, created a software platform where employees can buy and manage their health insurance and other job perks. About 1,000 large employers, from the American Eagle retail chain to the North Carolina State Health Plan, use the technology.

And whether they realize it or not, the millions of people who log onto the platform also share their data with Benefitfocus, including information about their health and their wealth.

CEO Ray August said late last year that data is an increasingly important part of the company’s strategy as it seeks to build revenue and turn a profit.

“We have a very unique and rich data set,” August said at a Raymond James conference in December. “We use that information to proactively reach out and touch those consumers.”

Benefitfocus has amassed about five petabytes of data, the equivalent of about 100 million four-drawer filing cabinets filled with documents. The company stores it all at offsite servers in Charlotte and Raleigh.

It uses the information, which is kept anonymous, for research that might help its customers better cater to their employees. For example, Benefitfocus will know from medical data when a user has a baby. Benefitfocus can then notify the new parent about updating their medical coverage.

The information also is leveraged to generate recommendations for ancillary products that, in some cases, provide commission revenue to a Benefitfocus subsidiary.

The company calls the online prompts “Smart Moments.” It executed 2.9 million of them last year, meant to "drive a more personalized" experience, August said in November. 

Benefitfocus said the insights can help workers learn about what perks are available through their employers.

"This can help them better understand the needs of their employees, how well they’re being met by their current plans, and how they might be better served by changes or additions," Benefitfocus spokesman George Evanko said in a prepared statement.

Financial analyst Nandan Amladi, who follows Benefitfocus at Guggenheim Partners, said data collection has become the "holy grail" for software businesses.

And Benefitfocus is becoming a heavy hitter: About 25 million people use its platform, according to the company's latest estimate.

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"They're actually playing at a national scale," Amladi said. 

The employers that buy Benefitfocus' services must get permission from their workers to share their data with the firm. But Benefitfocus itself isn't required to provide the end users with a disclaimer explaining how it collects data. 

Rachele Hendricks-Sturrup, health policy counsel at the Future of Privacy Forum, a nonprofit that seeks to strengthen data privacy laws, said it is good practice for companies to explain in plain language to consumers what information it can collect and how it plans to use it.

“It’s really up to the businesses to make sure they’re putting privacy first, and that their business models take privacy seriously,” she said.

Hendricks-Sturrup said software firms have been building platforms where users give morsels of information. Firms can then make money off that data. Google is a prime example. The search engine giant uses the data it gathers about users to target advertisements.

“While people are engaging, they’re just dropping this data everywhere,” Hendricks-Sturrup said.

How big technology companies collect and mine private information — and how they notify people about how they're doing it — were the topics of multiple hearings in Congress last year, as lawmaker weighed whether to put guardrails on how firms handle data privacy.

California, home to Silicon Valley and the nation’s largest tech companies, is one of the only states with a data privacy law on the books. The new legislation gives residents the right to see all of the information a company has stored about them. It also gives consumers the right to sue companies over privacy policy violations.

The law passed as efforts to advance nationwide data privacy legislation stalled last year. Lawmakers in a number of other states are considering similar measures.

In its annual filing with the Securities and Exchange Commission, Benefitfocus said it believes it complies with the California law. Changing privacy rules could mean higher costs for the company, as it would for any business that collects and stores vast amounts of data.

It also says it has strong safeguards in place. Evanko said the company uses advanced encryption, and its systems minimize how often the information is accessed. Benefitfocus is also subject to audits that test its security controls.

"We are entrusted with people's most sensitive data, and we recognize that it is essential that it be secured at all times," Evanko said.

Reach Mary Katherine Wildeman at 843-937-5594. Follow her on Twitter @mkwildeman.

Mary Katherine, who also goes by MK, is a reporter covering health care and technology for The Post and Courier's business desk. She grew up in upstate New York and enjoys playing cards, kayaking and the Blue Ridge Mountains.

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