A Deeper Look – HRO and Health Care Exchanges

HRO is an ever changing set of services, processes, technologies, and client needs. My HRO colleague Amy Gurchensky recently covered one of the emerging service areas in benefits: health care exchanges. I wanted to know more about active employee exchanges and arranged for educational briefings with Aon Hewitt and Mercer since both are already in this market.

Both of the HRO service providers have found similar reactions from insurers to the exchanges. As with any new concept, some carriers are more progressive and recognize changing market needs. Other carriers are more cautious and methodical and want to know more about how the new models work, how to underwrite the risk, client implications, etc.

Even though health care exchanges offer preconfigured selections with price advantages for employers, exchanges are still group programs and the employer is still the plan sponsor for active pre-65 participants. Aon Hewitt’s corporate exchange offering includes services to help clients meet their obligations as plan sponsors.

Exchanges are a bundled service. Along with structured plans from participating carriers, traditional benefits administration services are also included. Both Mercer and Aon Hewitt have great depth in providing end-to-end participant services, handling escalations, and advocacy. For example, Mercer’s exchange offering includes clinical case management support as well as program oversight and audits. Aon Hewitt includes both tier one and tier two call center support and advocacy services for participants with issues or claims that are more complex and require a greater level of case management and carrier interaction.

Both companies are major league benefits administrators, and I wondered how the exchanges may impact revenues as clients move to an exchange-style service. Mercer sees the revenue impact as neutral initially and additive overall; Aon Hewitt views the exchange markets as an important natural extension of its traditional benefit administration services.

Today, health care exchanges are a very small part of benefits HRO, but there is significant growth potential. Mercer will be testing service models in rolling its Mercer Benefits Choice Exchange (MBCE) for employers with less than 1,000 employees, so expect to see the changes and evolutions that are common with emerging services. It will not be surprising if more HRO vendors launch exchanges, and even a couple large carriers may decide to offer exchange services directly as the market develops.

The future of health care private exchanges is not dependent on whether or not the current U.S. health care reform is amended or survives. Research indicates that up to 90% of employers offering health care coverage intend to continue to offer coverage in 2014.  Employers will continue to need options that help them offer competitive benefits at controllable costs, and innovative HRO service providers will continue to develop new services and options to meet those changing market needs.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

Transformational MPHRO is Thriving at IBM

I love covering MPHRO news! I still believe that broad-scope MPHRO has the greatest potential for long-term partnerships that create significant HR business impact and financial results for clients.

A summary of IBM HRO wins in the second half of 2011 shows that it is doing well in a still tough market for large-scale MPHRO while winning major MPHRO awards, including transformational deals.

Let’s start with the 13-year multitower award from Algar Group in Brazil that covers HR, F&A, and procurement supply chain management. The contract is valued at $100m and covers seven of Algar’s business segments and ~13,000 employees. While Algar Group covers a wide range of services: telecom, IT, agribusiness, and even tourism, it wants a standardized platform for back-office services with efficient processes, high quality, and lower costs. The HR portion includes call center, personnel management, benefits administration, payroll, training, and performance management.

There was also a unique long-term multitower award from Tanfeeth that covers HR, F&A, banking and other vertical back office, and client-facing BPO services. Tanfeeth is a fully owned subsidiary of Emirates NBD, the largest bank in UAE. IBM will provide managed services for the Tanfeeth shared services center, including BPO management and workflow services, predictive analytics, tools and training, and managing part of Tanfeeth’s delivery portfolio. The shared services center will also use IBM’s software applications to provide and manage the services and will support Emirates NBD’s 8,000 employees.

Tanfeeth will also provide services to other UAE organizations as the Gulf Cooperation Council’s first authorized multi-employer service center. This is a major strategic step for IBM in bringing larger-scale BPO to the Middle East. Tanfeeth has the needed local knowledge and long-term relationships, and IBM will bring its expertise in process, training, service delivery, and systems management.

As part of a planned transformational journey, there is a built-in attention for the employees of Tanfeeth and its clients covering change management, training and development, and even the opportunity for high-performance employees to participate in IBM’s worldwide leadership training program.

Then there is the competitive-bid MPHRO contract award from Air Canada for almost eight years and worth an estimated $76m. The deal is for full-scope MPHRO serving Air Canada’s 26,000 employees in North America and includes HR contact center, employee data management, employee travel support, payroll, benefits administration, leave management, recruiting services (with select support from manpower), and software application support for the HR systems used to provide the services.

Why is IBM continuing its MPHRO winning streak? According to Kevin Howlett, Air Canada’s senior vice president of employee relations, “IBM’s core strengths as a market leader in innovation played an important role in our decision-making process.” It also helped that the client felt IBM also had the strongest service offerings, a commitment to transformation, and the proven ability to ensure delivery performance and lower cost.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.