The shift to outsourcing benefits administration is rapidly gaining momentum as more employers slim down staff and hand off complicated administrative issues to outside experts.
The shift was apparent when Guardian Life Insurance surveyed benefits managers and employees before last year's enrollment, and found a significant year-over-year increase in the number of respondents who said they were planning to increase the use of third-party benefits services.
The information was among the findings of an extensive survey commissioned by Guardian, dubbed The Guardian Workplace Benefits Study. The annual study revealed the trend toward outsourcing is being driven by the twin factors of reducing internal costs and delegating difficult tasks to outside authorities.
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Respondents cited the Patient Protection and Affordable Care Act as one impetus for these shifts. Only 17 percent said they were "very successful" in preparing for healthcare reform's effects on their benefits program, while 80 percent said they were either no successful at all or only somewhat successful at doing so.
Only about one in five said they had done a good job of integrating healthcare reform into their benefits packages, and about the same number (22 percent) felt they did a good job of explaining the changes to their workers.
Given these results, it perhaps came as no surprise that outsourcing looked better to these respondents in the fall of 2013 than it did a year earlier.
According to Guardian's data, 62 percent of respondents outsource medical and voluntary benefits, and 51 percent outsource non-medical benefits. When the benefits managers were asked if they planned to increase their outsourcing, 35 percent said they would. In 2012, 24 percent said they intended to increase outsourcing.
Such changes were in the wind for other benefits strategies. Findings included:
49 percent said they were using fewer carriers in 2013, versus 42 percent in 2012;
35 percent said they are using purchasing groups or benefits auctions, versus 27 percent in 2012; 29 percent said they were shifting more risks to benefits providers by converting from self-insured to insured plans; in 2012, 23 percent were doing so.
When asked what the main advantages were to outsourcing, a solid majority—65 percent—cited "ease of administration." "Consistency of administration" and "cost effectiveness" were the second most cited reasons, both capturing 40 percent of the responses.
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
