Changing Suppliers Improves Health Program Offerings, Benefitting the Buyer and its Employees | Article
Acosta is a Jacksonville, Florida-based marketing firm with offices in every major city in the United States and Canada. It serves over 1,000 consumer packaged goods companies such as Kellogg’s, Heinz, Ralston Purina, and Campbell Foods. With a workforce of over 16,000, the company virtually doubled in size since 2000 thanks to an aggressive acquisition program.
Such prolific growth typically puts pressure on a company’s HR department, especially when it comes to managing employee health benefits. “And that was easily the largest single expenditure for that department,” notes Pete Kneedler, Director of Compensation and Benefits at Acosta.
So in mid-2008, when its contract with an incumbent outsourced benefits administrator (OBA) approached its end, Acosta considered a change. “We weren’t dissatisfied with them,” says Kneedler, who adds that finding a more responsive provider was the objective.
A fall 2009 survey by IDC — Benefits Administration in Turbulent Times: U.S. Buying Behavior and Intentions — explains the growth of OBA. It reveals that buyers of all sizes are expressing concern about pending healthcare reform and the rising costs of offering benefits. “Going beyond the obvious need for good service, suppliers should focus on cost containment, flexibility, and good underlying technology to retain client satisfaction,” says IDC Program Manager Lisa Rowan in characterizing the growing provider obligations in OBA.
Among the firms invited to respond to Acosta’s RFP was Boston-based Workscape, a top-down provider of Web-based health and welfare benefits administration technologies and support services. The invitation was based on Workscape’s relationship with Acosta’s benefits consulting firm.
The firm won the contract in June. But with an enrollment deadline of early November for 2009 coverage — four months away — and benefit offerings that included two new health plan packages, both partners needed to move fast.
A new benefits strategy and provider support make it go
For calendar year 2009, Acosta chose to retain its legacy PPO but added two consumer-driven health plans (CDHP). These enable employees to use employer-funded health reimbursement arrangements (HRA) to directly pay routine health care expenses; there is also a higher-deductible health plan (HDHP) for catastrophic medical expenses.
A Workforce Management survey released in June 2009 found outsourcing is now more common for firms with large employee counts. Roughly 35 percent of organizations with more than 5,000 employees now use benefit management providers, up from 28 percent the previous year.
These integrated, Web-based decision-support tools help employees choose the healthcare plan best suited to their personal and financial needs. Workscape’s Web dashboard tool box offers cost calculators and other management features that Acosta found drive greater participation in their flexible spending account programs (FSA) and HRA plans.
Workscape Vice President of Product Marketing Steve Migliaccio points out Acosta now offers lower premiums to employees who move to a CDHP and incentives to those employees who use Web decision-support tools to manage their plans.
Such a major decision by its employees, coupled with new offerings and a new OBA provider to manage the new health plans, could force many Acosta workers outside of their comfort zone, something that was not lost on both partners.
“Employee acceptance is a warm and fuzzy that’s based on employee comfort,” says Migliaccio.
“With all of the changes, we knew it was vital to do a really good job communicating to the employees; so we took it on the road,” Kneedler says.
The goals were educating employees about their new healthcare choices and raising enrollment in the FSA and CDHP options. “Workscape partnered with us and certainly made it easier. They helped us communicate the value of these new benefits.” He says employees were more concerned with the two new CDHP plans and how they would affect them. “But they realized this was a step in the right direction and still is,” he says.
Kneedler says Workscape’s expertise in successfully carrying this to Acosta workers was one of the most important features in the early stage of the OBA engagement. He adds the user-friendly Web dashboard “was a comfort to the rank-and-file.”
Provider is a seamless service extension of the buyer
For 2009, the benefits were significant. In addition to Acosta saving around $100,000 (about 15 percent of its annual benefits administration budget), the employees who chose one of the new FSA/CDHP options saw savings on their personal taxes of $290 on average, with an additional $50 in FICA savings for the company. Web-decision-support user employees saved an additional average of $321 per participant compared to non-users.
Slightly over 55 percent of the 5,600 Acosta employees that enrolled in medical coverage chose one of the HRA options. Both partners see it as a success, considering the short four-month service period leading up to the enrollment deadline.
“The numbers were much better than we anticipated first year, given the migration to new health plans plus outsourcing to a new benefit administrator,” Kneedler says. The company’s second-year enrollment ended in November 2009, and the plan enrollment numbers remained consistent. “This tells us the online benefits-enrollment site and decision-support tools enable our employees to choose the best plan for themselves and their families.”
Kneedler sees this outsourcing engagement as beneficial in both a cost-to-return and a total value proposition. “The saved time and energy in human capital terms for our benefits department is apparent because these are things we don’t have to worry about anymore.”
“If any outsourcing provider, regardless of service, can be a seamless extension of the buying company, they will be successful,” says Workscape’s Migliaccio.
Kneedler agrees. “The most important trait in a provider is the ability to deliver innovation, flexibility, adaptability, and responsiveness. Workscape certainly delivers all of those practices to our employee health benefits management services.”
Lessons from the Outsourcing Journal:
- Adept outsourced benefits administrator OBA providers can provide financial savings to the buyer and help employers create better benefit value though more efficient employee management of their health plans.
- Companies can achieve more employee buy-in when the outsourcing partner helps the buyer explain the benefits of the new programs to employees.
- Innovative, best-of-breed OBA providers ease the stress of migrating from internally managed benefits administration to externally managed programs in addition to delivering significant savings over traditionally expensive internal benefit programs.