HRO and Innovation – Getting Practical

Linda Merritt, HRO Research Analyst, NelsonHall

Innovation in multi-process HRO (MPHRO) has been a topic of discussion, and some contention, since the early mega-deals that created the modern MPHRO market more than ten years ago.

Even in the early days there was a desire for innovation, but there was also a lack of common definitions and mutual understanding, along with difficulty in articulating innovation in contract language.

There was an even greater barrier – systems spaghetti. Early MPHRO clients had highly-customized ERP infrastructure, aging legacy systems, and third-party applications, much of which may have been non-centralized and non-integrated. Each major customer was in their own bubble of services and systems. It quickly became apparent that it would be hard to add new and different innovations within the constraints of the contracts and the technologies.

Platforms for Innovation

Major MPHRO service providers now have global multi-client service delivery and data centers with sophisticated workflow processes. Early clients have been moved bit-by-bit into the common support infrastructure, even if they remain on their own, licensed ERP systems.

Many HRO clients are ready for increased standardization and multi-client platforms to reduce cost and to improve performance. Innovative cloud-based SaaS and services platforms are opening up new services to the mid-market and parts of the large client market:

• Clients on a shared service platform benefit from ongoing incremental improvements
• Clients benefit from access to new products and services without paying a significant portion of the R&D needed for a one-off innovation.

Some tension between continuous improvement and innovation is natural, as the line between an “included enhancement” and what is “new and different to be added as an extra charge” looks very different depending on whether you are a buyer or a supplier.

Collaborative Innovation

Client user groups support both HRO improvement and innovation. Vendors were originally reluctant to let clients communicate with each other (partially because the clients might “gang-up” on the vendor – and sometimes they did!).

Companies like IBM and Xerox were leaders in developing client advisory boards. These interactive groups provide feedback on the services, give input into common needs, and even offer guidance on parts of the vendor’s development roadmap. They are not just “the voice of the customer”; they are also a built-in base of beta testers. Willingness to put some skin into the game is also a great way to test market viability and further strengthen relationships.

Infrastructure of Innovation

Buyers can develop their processes for HRO innovation in the following ways:

• Assess vendors for innovation capabilities as part of the selection process
• Develop the language and mutual expectations for measurable innovation upfront and include in the terms of contract. Include who pays, and when, determine if there will be vendor incentives, and clarify the client’s role
• Use the governance process to jointly monitor, manage, and measure improvements and innovations over the course of the relationship.

The good news is that we are beginning to build the HRO infrastructure for future innovation; common language, standardized multi-client platforms, and client user groups.

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HRO Benefit Providers Go Exchange Wild

Linda Merritt, HRO Research Analyst, NelsonHall

Activity is picking up again in readiness for the fall benefits enrollment season with HR benefits service providers adding various types of new health insurance exchanges (HIEs).

New HIE Entrants

Towers Watson has just launched its HIE platform, OneExchange, for employees, pre-65, and Medicare retirees. It builds on Towers Watson’s 2012 acquisition of Extend Health and offers employers both private and public exchange-based health insurance options for full and part-time employees and retirees.

Features include:

• Support from initial financial analysis for employers, to plan comparison, purchase and enrollment, and post-enrollment support and advocacy for individuals
• ExtendRetiree: Medicare-eligible retiree assistance to identify and select supplement health plans from the myriad of available products
• BenefitView: real-time dashboard for employers.

Buck Consultants, a Xerox Company, launched a private HIE, RightOpt, for employers with more than 3,000 employees. The exchange will offer:

• Both a self-funded and fully-insured model
• Personalization based on a family’s health, adversity to risk, and preferences
• Member education, decision-support tools, and health engagement resources.

RightOpt will complement Buck’s retiree HIE, My Medicare Advocate, and will be available for Fall 2013 enrollment.

RightOpt intends to differentiate from other private HIEs by allowing employers to use a national network of providers so employees can access the more deeply-discounted networks of providers by metropolitan area; a model that was historically too administratively complex for many employers.

New HIE Alliances

Fidelity Investments announced a strategic alliance with Extend Health, a Towers Watson Company, to provide HIE services to retiring employees to identify and select Medicare and private health care options through Extend Health.

Fidelity is also expanding its own capabilities to incorporate retiree health care into retirement planning including retiree medical account support services to plan sponsors. Examples include:

• Recordkeeping and reimbursement services
• Retiree workshops and meetings
• Strategic communications expertise.

New HIE Exchanges

Those already in the market, including Aon Hewitt and Mercer, are not sitting still.  Mercer has added Mercer Marketplace, for employers with more than 100 employees, to expand its suite of private HIEs. The exchange utilizes a cloud-based technology platform with call center services and online decision support during enrollment.

Affordable Care Act Will Drive Growth and New Services

Once the final ACA regulations kick-in, there will be even more complexity for both employers and employees. Benefits providers like Towers Watson are already preparing more services to roll out including:

• Connecting workforce segments such as pre-65 retirees, part-time, contract, and seasonal workers to plans offered on public exchanges
• Providing financial analysis, modeling tools, and consulting to help employers decide whether to use private or public exchange solutions
• Enabling employers to transition active employees to exchanges offering individual health plans or group-based plans.

HIEs provide many positive benefits:

• Employers gain help in controlling cost and caring for employee health care needs
• Employees gain access to wider choices at group discounted rates as well as advanced decisions support tools
• Benefits providers can use existing outsourcing capabilities, as well as leverage consulting services and allied services such as Medicare, Medicaid, and the new public exchanges.

No wonder benefits provider have gone HIE wild!

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