Posted tagged ‘benefits administration outsourcing’

Benefits HRO and the Impact of Changing Benefits Trends

April 18, 2012

This week, we look into the world of benefits from the 10th Annual MetLife Study of Benefits Trends. The long-running employee benefits research highlights the changes in trends due to the changes in the economy and their impact on the generations of employees.

Employer goals and objectives for benefits remain the same: control costs, attract and retain employees, and increase productivity. It is what employees, especially younger employees, value now that has been changing. And that may call for a change in strategies and approaches to maximize the dollars that employers spend on benefits.

Traditionally, younger employees were not very focused on long-term financial planning and retirement; now, 52% of those 21- to 30-year-olds are concerned about long-term financial security. Even though employees know that they must accept greater individual responsibility (63%) and are likely to face additional cost shifting in the future, nearly half (49%) of those surveyed say that because of the economy, they are looking to their employer to help them achieve financial protection through a range of employee benefits. The Generation Y percentage looking to the employer for help is even higher at 66%. Today’s employees of all ages are more aware than ever of the value of employer benefits, both traditional – like medical and dental – and voluntary benefits, where the employee may pay more or all of the cost. Take advantage of this awareness to increase communication, education, decision support tools, and even branding of the benefits you are providing.

Seventy percent of surveyed employers are planning to retain current benefit levels and only 10% may cut benefits, but 30% may need to continue cost shifting to employees. Few employers are planning to spend more overall on benefits, but employers are open to shifting priorities. For example, there are plans to increase the number of wellness programs and voluntary benefits offerings like long-term care, critical illness coverage, optional life coverage, and optional disability coverage.

Another reason why I wanted to bring this study to your attention is that it separates the employer data into progressive and standard. Progressive employers more attuned to changing employee needs – such as wanting more choices and life stage options – and likely to make adjustments to achieve cost control, attract and retain employees and increase productivity. This split is similar to other areas of HRO where one client wants the latest in transformation to optimize value and achieve business results and another wants improved technology and processes to lower costs and increase efficiency.

Employee benefits needs are growing, changing and challenged by uncertain economic conditions. All benefits HRO clients should expect to have a partner in adapting to changing conditions. Whether that means access to full-scale consulting for a revamp of benefits spend, policy, and offerings, or basic access to vendor research and client networking opportunities, what matters is the match of client expectations and the service provider’s ability to deliver.

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.

Opportunities Expand for HRO: Health Care Exchanges

April 3, 2012

Private health care exchanges are a hot topic, and the number of HRO service providers with such an offering is expanding. In addition to current providers including Aon Hewitt, Extend Health, and Xerox/ACS, Mercer announced a suite of health care exchange offerings last week.

It’s no surprise that health care exchanges are increasingly popular since the benefits extend to both employers and employees. While employers reduce liability and administration while accessing better plans or prices, employees obtain access to competitive pricing, employer subsidies, and assistance with selecting the plan best-suited for their needs.

Here is a brief synopsis of the existing health care exchanges in the market.

Retiree exchanges: These exchanges typically help retirees select a Medicare plan and/or supplemental insurance products based on their medical needs and budget. Service provider offerings typically include:

  • Call center services to assist retirees in selecting a plan including assessing needs, evaluating options, and enrollment into a plan
  • An online portal for shopping plans
  • Written materials / communications such as booklets, letters (e.g., appointment, confirmation of coverage, and annual enrollment letters), appointment reminders, etc.

Retiree exchanges were the first type of exchange to appear in the market, and as a result, there are a few service providers with such offerings available. Extend Health has its ExtendRetiree exchange. Aon Hewitt added its retiree health care exchange in March 2010 when it acquired Senior Educators, Ltd. In 2011, the exchange was renamed “Aon Hewitt Navigators.” Xerox/ACS launched its retiree exchange, “My Medicare Advocate,” in October 2010.

Among the exchanges it announced last week, Mercer launched its Retiree Medical Exchange. Its exchange leverages any employer subsidies available for coverage by converting current and future retirees to a DC model where they purchase individual coverage most-suited for them.

Active employee exchanges: While the retiree exchanges are focused on individual coverage, the exchanges for active employees are focused on group plans.

Aon Hewitt’s offering, for example, provides employees with a credit to purchase health coverage that can be accessed through its private exchange. Once employees log-on to the exchange, they will select health care coverage from group options that are standard levels of coverage with varying levels of reimbursement.

The Mercer Benefits Choice Exchange (MBCE) allows employers with 100 – 1,000 employees to contribute a set amount to a HRA. Employees then use decision-support tools to select coverage and enroll online.

Mercer’s other offering, Mercer Health Advantage (MHA), allows self-funded employers with >3,000 employees to enroll employees in new medical plans beginning January 1, 2013 that will save the employer 5% or more. Employers will also get access to dedicated MHA clinical care management with ongoing oversight and audit capabilities.

Benefits administration is a major and mature HRO service line. Health care exchanges present a welcome new growth opportunity for HRO and more options for employers and active and retired employees. Expect more benefits service providers to add to the available service offerings.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

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M&A Activity in Benefits Administration: Round 2

March 12, 2012

Following the benefits administration merger and acquisition (M&A) frenzy of 2010 that resulted in some major consolidations including Aon Hewitt, Towers Watson, Xerox/ACS and ExcellerateHRO, to name a few, are we poised to see round 2?

The second wave actually began in early 2011 and tends to consist of the more established providers, in their own right, acquiring Tier 2 health and welfare (H&W) administration companies in the U.S.  Examples include:

  • Towers Watson acquiring Aliquant in January 2011
  • Sedgwick, a leader in the leave of absence administration market with ~20% market share, acquiring the productivity solutions unit of Nationwide Better Health in May 2011
  • Morneau Shepell, the leading total benefits outsourcing (TBO) provider in Canada, acquiring SBC Systems Company in January 2012.

As of last week, we can now add ADP to this list since it signed a definitive agreement to acquire SHPS Human Resource Solutions—a subsidiary of SHPS, Inc. ADP has actually been making key acquisitions to strengthen components within its benefits administration offering for the last 18 months. It started with Workscape, which added compensation management services, and was followed by Asparity Decision Solutions for decision support tools and analytic capabilities.

Now, the SHPS acquisition strengthens ADP’s leave administration and reimbursement account administration offerings. The HSA and HRA components will be especially important considering the rising cost of health-care and the transition toward high-deductible health plans paired with these health savings accounts.

The H&W acquisition trend is also expanding beyond the U.S. It started in September 2010, when Capita – a U.K.-based HRO vendor providing total retirement outsourcing (TRO) exclusively in the U.K. – acquired FirstAssist Services Holdings for £12.5m. Then it continued when Mercer acquired REPCA – a brokering and advising firm for health and benefits (H&B) plans – to strengthen its H&B administration offering and advisory services in France.

The remaining question on my mind is whether U.S.-based TRO providers such as ING, Great-West, T. Rowe Price, etc. plan to jump on the H&W acquisition bandwagon to provide a one-stop shop for benefits administration like Fidelity Investments.

I’m eager to see who will make the next M&A move in benefits administration.  In the meantime, it’s always fun to hear about cross-selling opportunities that resulted in contract scope expansions.  Stay tuned.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

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The Evolution of TBO Deals: Part I

March 5, 2012

I am deep into research for the next NelsonHall Targeting Benefits Administration market analysis, and I noticed that like multi-process HR outsourcing (MPHRO), total benefits outsourcing (TBO) often stems from a desire to consolidate the number of service providers. The benefits of MPHRO are realized mostly by client employers with self-service convenience provided for the employees. The benefits of TBO extend beyond the client employer to its employees and retirees who get an enhanced participant experience from the services being integrated, which not only offers convenience and ease of use but may also increase the value of the offered benefits to the individual participants. 

While the drivers and benefits of TBO are often similar with clients, how TBO deals have come into existence have greatly varied.  The four different methods we’ll further discuss include:

  • The traditional big bang approach
  • The big bang approach version 2.0 (i.e., converting existing consulting clients)
  • The mass consolidation approach
  • The step-up approach.

The traditional big bang approach: This is the oldest method in existence and is quite recognizable in the market, especially with large multi-nationals. It doesn’t happen often, but it definitely creates a big bang when a large employer outsources defined benefit, defined contribution, and health and welfare program administration for the first time—with all going to one service provider!

The big bang approach version 2.0: The big bang approach version 2.0 differs from the traditional approach in that the client and service provider already have a pre-existing relationship, typically on the consulting side.  Also, the client may or may not already be outsourcing some benefits administration services to perhaps test the waters, but the majority of services remain in-house.

The mass consolidation approach: In this approach, the client has already outsourced all benefits administration services to a variety of service providers and is now seeking one vendor to manage all services. Consolidation is sometimes done by a larger vendor management strategy but is often triggered by mergers and acquisitions (M&A). Client M&A activity is a real two-edged sword for all suppliers including TBO providers. Even if separate benefit vendors are initially kept in place, the danger zone remains open for years—especially during times of contract renewal.

The step-up approach: The step-up approach is the newest method and is exactly as the name implies.  It is where clients begin using a particular service provider for one benefits administration service and then, based on performance and satisfaction, add other services accordingly.

Later this week, we’ll take a look at examples of each type of TBO deal.

 Amy L. Gurchensky, 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.

NorthgateArinso Proving Success with Legacy Convergys Clients

June 23, 2011

When NorthgateArinso acquired Convergys’ HR management business in March 2010, my first reaction was that this was a really good deal for NorthgateArinso because it would be gaining some big brand name clients in the U.S.  Some wondered whether NorthgateArinso would be successful in retaining these legacy clients, but I was optimistic for two reasons.

First, it is mainly the same legacy Convergys employees supporting these clients, most transferred to NorthgateArinso with the acquisition.  It is well-known that the most successful ingredient in an outsourcing relationship is how well the client and service provider can work together and have an effective relationship / partnership.

Back in October 2008, I attended the Convergys Industry Analyst Day in Cincinnati where Thomas Neltner, VP of HR at Fifth Third Bank, was a guest speaker.  Thomas spoke about why Fifth Third chose Convergys, its services outsourced, and benefits obtained, including 99% utilization of employee self-service and 40,000 transactions turned paperless.  So it is no surprise to me that this week Fifth Third agreed to extend its contract with NorthgateArinso for an additional seven years.

The original contract with Fifth Third was signed in October 2003 for five years.  Services provided to the bank’s 20,000 employees included:

  • Payroll administration and processing
  • Compensation administration
  • Performance management support
  • Benefits administration
  • Time and attendance management
  • Implementation of recruitment technology and a self-service web portal.

In May 2007, the contract was extended for an additional five years for 21,000 employees and services were added including recruiting and specialized staffing and employee and manager self-service.  Now, the seven year extension through 2019 also includes upgrading the banks current SAP HCM platform to NorthgateArinso’s euHReka technology platform.

euHReka is also based on SAP but is a preconfigured multi-tenant platform that is fully integrated in providing HR and payroll services. In addition, it is used as a multi-country payroll solution, although that won’t be needed with Fifth Third, but you never know what the future may bring, which brings me to the second reason why I was optimistic about NorthgateArinso’s ability to renew legacy Convergys clients.  That is, similar to how customer service is a core competency of legacy Convergys, the same is true for technology and systems integration at NorthgateArinso.  This is a strong combination that NorthgateArinso can capitalize on when other contracts with marquee clients such as DuPont and Johnson & Johnson come up for renewal in the years ahead.  It will also help with winning new business!

Gary Bragar, Lead HRO Analyst, NelsonHall