Benefits Outsourcing is Blooming

Linda Merritt, HRO Research Analyst, NelsonHall

Benefits administration is producing a bountiful crop of new and expanding services. Recent contract award announcements included ADP, Aon Hewitt, Ceridian, Equiniti, Fidelity, Mass Mutual and Merrill Lynch. A wide range of industry segments were represented: banking; food; education; non-profits; hi-tech; pharmaceuticals; and travel. This week, I have taken a look at some of the newer benefit outsourcing “crops” that are starting to grow nicely.

Managed Retirement Accounts

Fidelity’s relatively new managed retirement account offering – Fidelity Portfolio Advisory Service at Work – was designed to address the low rate of adequate preparation for retirement by many employees by combining Fidelity Investments plan sponsor customized portfolio active management services with auto enrollment and available advisory services to help bridge the gap in achieving retirement goals from a defined contribution plan. The service grew in both participants and assets by 50% in 2012. Already in 2013, another 135 new clients have been added, bringing the total to more than 1,800 plan sponsors.

• Fidelity awarded a contract for Portfolio Advisory Service at Work by ADM.

Health and Wellness

ADP’s Vitality wellness solution supports employers with between 50 and 1,000 employees manage rising healthcare costs and also reduce employee absenteeism. Vitality’s incentive-based program includes an interactive wellness portal, health risk assessments, biometric screenings and personalized wellness plans with recommended goals and activities. It integrates with social networking sites, mobile applications and fitness technologies; and when employees achieve planned goals, they earn points towards lowering their health plan contributions. The service is also integrated with ADP’s payroll services.

• ADP awarded a contract by Jackson Companies for ADP Vitality services.

Benefits Bouquet Bundles

HRO buyers want multiple related services from one vendor under one contract; and health and wellness lends itself to packaging separate services into bundles. Ceridian’s LifeWorks.com combines EAP, work-life, and wellness services into one program with its own portal and mobile access. Also available is Health Coaching – a program for high-risk employees that provides access to comprehensive health assessments and personalized guidance programs – and Client Value Dashboard – included for employers to monitor reports usage data and ROI information.

• Ball State University chooses Ceridian’s LifeWorks.com

Private Employer Exchanges

Mercer’s Marketplace allows employers to improve management of their benefits spending and administrative responsibilities for active employees. Employers determine how much to contribute toward the cost of their benefits program and can select from a range of insured and self-funded products and providers. The platform includes full benefits outsourcing and provides employees with call center and online decision support.

• Mercer recently announced names of 10 of its 20 national, regional and state carriers that have joined Mercer Marketplace for providing core medical and voluntary benefits.

A good garden has a variety of plants. Some base crops are evergreen like benefits enrollment and management services, while others are changed out to meet growing market demand. Benefits HRO: how does your garden grow? Very well thank you.

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Benefits Administration Outsourcing – Driving Business Value

Managing the annual benefits enrollment process is a core value of benefits administration outsourcing (BAO) and for years large companies have taken advantage of its cost and convenience. According to Towers Watson’s Annual Benefit Enrollment 2011 survey, 78% of large companies outsource enrollment, while almost half of midsized companies still insource. The scale will continue to tip towards outsourcing as three fourths of the responding midsized employers that currently insource indicated plans to outsource enrollment.

What is causing this tipping point? I think it is the addition of complexity to the healthcare equation for both the employer and the employee. Start with the ever rising healthcare costs driving increasing use of consumer driven health plans and healthcare savings accounts, add in the U.S. healthcare reform changes, and the options and implications start to multiply exponentially.

Even with the success of web-based enrollment, now at 89% according to Aon Hewitt’s 2011 Annual Enrollment Insights, calls to service centers are still in demand. Change and uncertainty increase the need to talk to someone as helping employees understand new plan features and any changes in pricing create communication challenges. Service providers see increasing use of decision support tools (DSTs) to help employees. For those using BAO, Towers Watson reports 69% DST usage compared to 44% that insource.

BAO also makes the process of accommodating changes for healthcare reform a bit easier. Aon Hewitt saw a jump in enrollment of 15% in the number of covered dependents as participants added children between 19-25 who are now eligible for coverage under one of the first major reform changes. Even a change that is relatively simple to implement has broader implications including increased employer interest in ongoing dependent eligibility rather than just as an audit, and some are moving to per child pricing over family pricing.

New best practices will emerge in response to benefit changes.  Service providers highlight the importance of incorporating a participant’s actual health claims data into decision support tools. Aon Hewitt has already seen that 48% of participants using advanced DSTs changed their elections. This is another opportunity to strengthen the value of BAO as Towers Watson indicates that 83% of the survey respondents have not yet integrated claim data.

Another emerging best practice is incorporating wellness communications into the enrollment tools and process stream. One reason for this is pure practicality as enrollment is a prime time to think about wellness. Another reason is that more employers are making completing assessments or participating in condition management plans a requirement to receive incentives or participate in premium benefit levels.

The BAO sale can be made on cost, convenience, and complexity. With a crowded market of quality providers, the differentiating theme that should run throughout the year is how to drive behavior change that creates business value.  Does your benefits service provider add business value?

Linda Merritt, Research Director, HRO, NelsonHall