In the increasingly complex world of benefits administration, more and more employers are outsourcing their benefits administration. Larger employers are most likely to outsource this, using an average of more than five vendors. But increasing numbers of small and midsize employers are partnering with third-party benefits providers as well.
Benefits brokers can play an important role in helping employers navigate this space by becoming well acquainted with the benefits provider landscape and helping them make the right choices. But how do brokers determine which third-party providers to choose for their clients?
Determine Your Niche
Before you begin to scrutinize benefits technology vendors for your clients, you’ll want to go through your current book of business to determine what they have in common. You may find that you have a natural niche in a particular industry or with a particular employer size, and that will dictate the approach you take to analyzing third-party providers.
As you determine the market you seek to target, you’ll want to consider the difference in your role if you work with larger employers as opposed to smaller employers. If you focus on smaller markets, you may find that you’ll partner with one particular platform that you seek to bring in-house. Conversely, if you target larger employers with more complex needs, you may forge multiple partnerships and become more of a true consultant.
Learn the Space
After you identify your target market, it’s time to study the benefits technology space and learn each prospective partner’s specific capabilities. Start with a group of proven technologies that address both human resources and administration needs. Then choose those that offer combined capabilities, as no single technology solution will have everything.
The marketplace uses a variety of labels, such as “private exchange,” “benefits administration” or “human resources information system (HRIS).” These descriptions can be misleading, so you’ll need to gain a solid understanding of each technology platform and its actual capabilities.
As you first look at vendors, keep in mind that the products they offer can appear similar. However, as you dig into the details, you’ll find that there are notable differences. For example, one exchange may differ from another in the defined product it offers. Alternatively, some benefits administration platforms offer more flexibility than others. There are differences among HRISs as well. Some may have the same offerings but have limitations in areas such as minimal voluntary benefit options. The more platforms you research, the more you’ll see that different technologies serve various market niches.
Seek information from various resources to learn as much as you can about the market. Tap into the knowledge of those with experience in the field and agencies with whom you have a relationship. Consider attending industry networking events where you can learn more about vendor products and emerging trends. There may be an in-house expert in your agency who is intimately familiar with the benefits technology space.
And don’t forget to contact your carrier partners for information. Insurance carriers constantly evaluate the market and develop solutions and integrations that simplify the delivery of benefits for you and your clients.
Evaluate Vendor Attributes
Here are some specific attributes you will want to evaluate as you consider partnering with a third-party provider.
Compliance. A vendor should demonstrate the ability to comply with evolving government legislation, whether changes to the Affordable Care Act, tax reform or regulatory changes. Employers must be confident that their benefits vendors will keep them in compliance, and that vendors have the ability and technology to adapt to future changes in the law.
Product Offerings. Employers are offering a growing number of benefit types. Benefits such as disability or critical illness insurance, dental insurance, accident coverage, identify theft protection or wellness programs — and related administrative needs — are becoming more common and should be accommodated by newer technologies.
Carrier Connections. Does the vendor have online connections that will allow for real-time decision-making? Does the technology allow for ease of integration with the benefit carriers?
Ancillary Services. Some vendors provide additional services that enhance the value proposition. These services may include administration for benefits such as flexible spending accounts, health savings accounts, health reimbursement arrangements, COBRA or wellness programs.
User Interface. The interface should be intuitive for employees, provide guidance on options and include appropriate education about benefits terms. It also should provide engaging decision-support features that help workers get the most out of their benefits.
Cost. Learn about each vendor’s cost model to determine if the program is feasible for your client. If you plan to absorb the cost initially, how can you share that cost with the client?
Delivery Model. Each third-party vendor delivers its services differently. In some cases, a broker may buy a license to use software but be responsible for configuring the platform. Other benefits administration vendors provide all the services, including platform configuration, loading census files and supporting electronic data interchange connections with various carriers.
Customer Service. Vendors that offer excellent customer service can make your job easier. Assistance can take various forms — from online support to live customer service to user guides that help you configure the platform if you bring the technology in-house.
Platform Maturity. Benefits technology is an actively changing space with many new emerging companies. You’ll want to consider the importance of time-tested companies that have proved their ability to deliver on what they say they can do.
The selection of an outsourcing partner for benefits administration is a high-stakes decision for your client. It’s a task that requires close inspection of services to be provided and assessment of the levels of service that need to be maintained. Relationships with outsourcing vendors tend to be long term, adding to the importance of making the right choice.
By doing your due diligence on third-party vendors that provide this important function, you’ll ensure that your clients can proceed with confidence — and with every chance to be successful in a complex endeavor.