Know What You Need to Select a Benefits Provider



Choosing a benefits administration provider is increasingly a high-stakes decision. Benefits leaders evaluating vendors must consider a breadth of issues including escalating health care costs, the uncertain future of the Affordable Care Act, the growth of voluntary benefits, rising threats of cyberattacks and an increased expectation that they deliver consumer-grade technologies to stakeholders.

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Benefits leaders also have to decide if they'll simply bundle benefits administration with payroll services or opt to combine those functions with consulting or brokerage services in more comprehensive outsourcing arrangements. It's no easy decision: There are an unprecedented number of enterprise system vendors, benefit "point" solutions and total benefit outsourcing providers to choose from in today's market.

As vendor choices grow, benefits technology evolves and health care legislation remains in flux, it's more important than ever that benefits leaders know their stuff when selecting benefits administration partners.

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Technology Considerations

Technology has emerged as a key differentiator between vendors amid the digital transformation of benefits processes and the growing sophistication of decision-support tools available to help employees make benefits decisions. Experts say benefits platforms should be evaluated based on:

• Their ability to adapt and scale to new offerings.
  
• How well they automate workflows for administrators.
  
• The presence of engaging decision-support features.
  

The notion of what a comprehensive and competitive benefits program looks like continues to evolve, said Tom Dugan, senior director of product management for Benefitfocus, a provider of cloud-based benefits management software in Charleston, S.C. "The breadth of benefits that companies offer today is much different than in the past," he said. "For example, the average number of benefit types offered by large employers using our platform is now 15, with a growing percentage offering 20 types."

That growth reflects the increased popularity of voluntary benefits as employees take on more financial responsibility for their health care through high-deductible health plans (HDHPs). Benefits such as disability or critical illness insurance, ID theft protection, wellness options and even pet insurance place new demands on technologies and related administrative processes.

"Companies increasingly need a benefits platform adaptable and robust enough to handle each of these diverse products," Dugan said.

Benefits management platforms should be:

• Equipped to handle high transaction volumes in short time periods, like open enrollment.
  
• Able to accommodate the needs of multiple insurance carriers.
  

"Some organizations might be dealing with eight to 12 different carriers that need to receive data from a benefits platform," Dugan said. "Because there is no industry standard for data exchange for many benefit types, it requires more oversight to ensure that data transfer is accurate."

Employees now have the same expectation of benefits platforms that they do of technologies used in their personal lives, said Joe Kra, health office business leader for Mercer, a health insurance and retirement consulting firm in New York City. That standard applies to the burgeoning number of online self-service portals that allow employees to check benefits status, update personal information or use other features with little help from HR.

When employees buy consumer products online, Kra said, they expect:

• Intuitive interfaces.
  
• Easy-to-use guidance on which options are best.
  
• Definitions of terminology they don't understand.
  

"Historically, benefits technology didn't meet that criteria," he noted. "It wasn't long ago that benefits platforms with short educational videos or apps smartly embedded through the benefits experience were rare. But that's changed as the technology evolved."

The growing popularity of voluntary benefits also is influencing the choices that benefit leaders make in selecting or retaining vendors. As companies expand the universe of benefit offerings to employees, technology's ability to scale to handle those additions is crucial, Kra said.

"Voluntary or nontraditional benefits used to be separate election processes on the side," he said. "But vendors today should be able to integrate voluntary benefits with traditional offerings in a way that appears seamless to employees as part of one unified offering."

Cybersecurity also is a major criterion in selecting vendors as employee health and retirement plans become bigger targets of ransomware attacks. Experts say benefits leaders should work with their IT colleagues to ensure providers are taking the necessary security steps, since third-party vendor vulnerabilities can add risk when transferring sensitive benefits data.

Decision Support and Communication Tools

Another factor that distinguishes top vendors is the quality of decision-support and communication tools available to help employees make choices among benefits options. Educating a workforce about benefits remains a top challenge for many organizations. Dugan said that's often proven when companies survey employees following open enrollment to ask about benefits they'd like for the following year.

"It's not unusual for 30 to 40 percent of employees to say they want benefits for next year that they already have or are already eligible for," he said. "There is a continuing disconnect in communication about benefits within organizations."

It's not unusual for employees to say they want benefits offered next year that are already available.

Those communication and engagement efforts should happen year-round and not just during open enrollment, said Julie Stone, a senior consultant for health and benefits at Willis Towers Watson, a global advisory and brokerage company. "Enrollment is critical, but as new hires are onboarded or existing employees experience life events like the birth of a child or a divorce, they should know what's available to them and have easy access to decision support for benefits impacted by those events," she said. "That applies at the point of health care, as well, when people make decisions about specific care providers."

Short, engaging educational videos are now the medium of choice for many benefits administration platforms. Given the dry nature of benefits, providers find that employees are more likely to watch a brief video than to read text descriptions or to download brochures about benefits choices.

"If employees are given the option between a PPO [preferred-provider organization] and HDHP, we've found [that] an engaging 60-second video describing the difference captures their attention and aids decisions," Dugan said. "Embedding these videos in the enrollment process, especially where employees are being offered a voluntary benefit like critical illness coverage or have a difficult choice between two options, can have big payoffs."

Benefits administration providers also are adding more-advanced analytics and decision-support tools to their platforms. For example, to help employees avoid underinsuring or overinsuring themselves, Benefitfocus integrates plan utilization data with other information to help employees make better-informed plan choices.

"We help determine projected actual costs of employees for the year, since it can be easy to choose plans based on premiums alone," Dugan said. The company allows employees to review their own claims history from the previous year—how often they visited a physician or urgent care facility or used prescription drugs—and for every plan offered calculates a projected annual out-of-pocket cost by combining premium and utilization expenses.

"If you can simplify it to a few key numbers employees can use to compare various plans and give them an option to drill down deeper if needed, it leads to better decisions and outcomes," Dugan said.

Kra said more benefits vendors are using technology and smarter software to drive benefits strategy and not simply boost process efficiencies. Companies have long offered higher-cost and lower-cost benefits plans to employees, for example, but many tended to avoid the low-cost plans (lower premium, higher deductible) for fear of insufficient coverage.

"Yet in many cases certain employees can be better off taking the low [premium] plan and additional risk because they'll save so much on their monthly contribution it will cover the extra costs of a higher deductible," Kra said. "With the old technology and lack of good decision-support, employees often made inefficient decisions or decisions that cost them more money. That doesn't happen as much today as employees closely weigh options and elect more high-deductible health plans with voluntary benefits to fill gaps."

Kra said the presence of good decision-support tools like short videos contributes to employees signing up for voluntary benefits to support core coverages. "There also is plenty of data showing that when people take plans with higher deductibles and more cost-sharing they become more conscious about how they consume health care," Kra said.

But he also cautioned that technology is no panacea and should be coupled with effective human customer support. Because there often is considerable interaction between benefits vendors and employees, evaluating how well vendors will educate and advocate for employees is a significant decision point.

"There will be some issues you can't solve through a website and some employees who won't be comfortable doing everything online," Kra said. "Every good technology should be accompanied by excellent live customer service for more-complicated issues or when people simply need the human element to answer questions."

Stone said her research shows that a growing number of large and midsize employers are choosing to hold in-person meetings with employees to educate them about benefits options and as a way to supplement technology-delivered support.

"When it comes to truly understanding topics like financial investments, 401(k)s or how to maximize the value of health savings accounts, we've found groups like Millennials—who most assume want everything in digital form—actually value the chance to have in-person conversations with benefits teams or advisors who can walk them through these important decisions," Stone said. "I think there is a new desire and need to pair up human support with effective digital engagement."

Compliance Criteria

Benefits administration vendors also need the ability to adapt and stay current with shifting government legislation, experts say. "Whether it's uncertain changes to the Affordable Care Act, potential tax reform or other regulatory change, HR leaders should expect that their benefits vendors will help keep them in compliance," Dugan said. To that end, one advantage of software-as-a-service (SAAS) systems over onsite solutions is that the former can more easily deliver software updates to keep companies current on regulations.

According to a recent survey by law firm Littler, 20 percent of employers anticipate modifying their eligibility requirements for health care coverage if the ACA is repealed. The survey featured responses from 1,200 HR professionals, in-house counsel and C-suite executives in companies across a range of industries.

"There is a lot up in the air about whether some of the ACA's reporting requirements will be repealed as well as with related regulatory oversight issues," Stone said. "Some leaders who are in the process of making technology- or vendor-investment decisions are waiting to see what the new law of the land is before making selections."

Analytics Drive Insights

Benefits leaders also have new analytics options at their disposal as more vendors combine benefits enrollment and claims data to help HR make improved strategic decisions. These analytics give leaders a better understanding of their benefits costs and provide actionable insights so they can make "in-flight" adjustments to plans.

"If there is a trend emerging that shows people may not understand their urgent care options and are using emergency care too much, or may not be aware of mail-order options to save money on generic drugs, those developments can trigger communication to employees on such topics," Dugan said. "Seeing these trends emerge on a core analytics dashboard allows employers to make mid-year adjustments and educate employees about how they can achieve greater savings or improved care with their plans."

Vendors also offer plan modeling tools that allow benefits leaders to see how adjustments to their cost-sharing structures might drive different plan utilization behaviors. For example, changing deductible amounts by a certain percentage might shift a certain amount of employees out of one plan and into another. "That modeling enables leaders to make changes to plan designs that can have significant cost savings and other valuable impacts," Dugan said.

Dave Zielinski is a freelance business writer in Minneapolis.

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