Standardized Health and Benefits Admin Outsourcing Services Proliferating for the Mid-Market

As my colleague Gary stated in his May 27 blog, standardization is key in making mid-market HRO affordable, efficient and sustainable for both buyers and providers. And given the skyrocketing costs associated with healthcare and delivering health and benefits administration services to employees, it should come as no surprise that Mercer on June 11 introduced an expanded health and benefits administration outsourcing platform to offer a standardized solution for clients with 5,000 to 10,000 employees.

With this new service offering, Mercer joins the ranks of HRO vendors – including Hewitt and ExcellerateHRO (which, as of last week, is now exclusively owned by HP following its purchase of Towers Perrin’s shares in the company) – which have developed and are providing standardized health and welfare offerings to the mid-market. What’s the value proposition of such standardization for mid-market buyers?

Our January 2009 Mid-Market HR Outsourcing Market Analysis found that the top drivers for outsourcing benefits administration services are: 1) Better technology than clients have the capital to invest in themselves; 2) Improved employee experience; 3) Standardized and streamlined processes; and 4) Reduced expenses. And indeed, the standardized health and welfare offerings from today’s HRO providers are helping mid-market companies meet each of these needs. Let’s look quickly at each one.

Better Technology – due to economies of scale, providers have been able to cost-effectively develop or invest in technological platforms which enable rapid implementation – and thus quicker payback – of automated functions and robust self-service capabilities for their clients’ managers and employees.

Improved Employee Experience – whether it’s changing a deductible amount, applying for a Leave of Absence, enrolling in a benefits program or adding or removing a spouse or dependent to an insurance policy, employees feel more in control when they can manage health and benefits-related activities themselves via self-service. And they can do so 24/7, rather than during regular working hours.

Standardized and Streamlined Processes – enterprise-wide consistency regarding activities such as how to enroll in a benefits program, how to determine the impact of healthcare policy changes, who to call for questions and where to go for online portal-based FAQs is advantageous for employees and their companies alike in terms of satisfaction, bandwidth and cost savings.

Reduced Expenses – our above-mentioned Mid-Market Analysis found that mid-market health and benefits administration outsourcing buyers are reducing their costs by an average of 26 percent.

We estimate more than half of the health and welfare outsourcing market is comprised of mid-market organizations. Further, we anticipate growth in overall benefits administration in the mid-market will be 10 percent through 2013, which signals a continuing trend for mid-market organizations to address technology, service delivery and cost issues through outsourcing.  But questions do remain. Which companies will jump on the bandwagon, and which won’t? Will health and welfare outsourcing for the mid-market live up to its promises? This is certainly a space to keep an eye on.

Until next time, happy sourcing!

Helen Neale, Research Director, Human Resources Outsourcing, NelsonHall

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2 Comments on “Standardized Health and Benefits Admin Outsourcing Services Proliferating for the Mid-Market”

  1. umair Says:

    debatible article

  2. hjneale Says:

    Thanks for your comment. If it’s debatable – engage with me – what are your thoughts?


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