The following post comes from a Benefits Administration vendor that our team has had the opportunity to work with on several client engagements. Empyrean Benefit Solutions was founded in 2007 and provides technology and services for managing large and middle-market employers’ health and benefits programs. Empyrean provides enrollment, eligibility management and a range of other plan administration services to three distinct markets: employers, insurance brokers and healthcare exchanges. Lockton still remains vendor neutral, which is why this is just the first of many vendor guest posts. We realize that vendors have a lot to say and have access to some solid data about the happenings of the HR Tech industry and we want to relay that information to you. What better way than to let them tell it to you through us?!

As benefits administration becomes more complex and new requirements emerge, HR executives find themselves facing the tough decision of whether to continue handling these tasks internally (“insourcing”), whether to outsource all benefits administration or whether to find a middle ground, retaining pieces of their current process in-house and outsourcing the rest (“co-sourcing”).

Today, some organizations opt to insource because they are more comfortable maintaining control of all administrative functions, in spite of the need to continually invest in the technology and the ongoing education necessary to perform these functions. Other choose to insource because they tend to be more paternalistic and want to stay in close touch with their workforce, believing that they can provide a better, more personalized experience for their employees.

Most recently, however, a number of employers have chosen to outsource their benefits administration as a direct result of the ever expanding rules and regulations around the Patient Protection and Affordable Care Act (health care reform). The new requirements only make benefits administration more complex, more costly and more time consuming than ever, and these employers have come to realize that outsourcing can provide the infrastructure and technology needed to handle the myriad benefits administration tasks, as well as give them access to the expertise needed to ensure ongoing regulatory compliance. According to Everest’s February 2013 Benefits Administration Outsourcing (BAO) – Service Provider Landscape and Capability Assessment, “the Benefits Administration Outsourcing (BAO) market grew at a healthy pace of 13% to reach US$6.1 billion in annualized revenue in 2012.” This assessment went on to say that the market is expected to accelerate at an even faster rate in 2014.

Not surprisingly, large employers are more likely to outsource benefits administration due to the size of their workforce, their multiple locations and/or the greater complexity of their benefit programs. Midsized or smaller organizations tend to consider outsourcing benefits the solution for lack of internal resources and expertise. Many employers, regardless of size, choose to work with an external advisor when making their decisions regarding outsourcing. Whether soliciting third-party advice or making the determination on their own, most employers consider the following factors and outcomes as part of their decision-making process:

• Reducing the cost of benefits administration
• Ensuring ongoing regulatory compliance
• Freeing up internal HR/Benefits resources to focus on core business needs and more strategic initiatives
• Improving the overall employee experience through streamlined enrollment processes
• Positively impacting employee engagement and communication through Web-based, employee self-service technology and more robust decision support tools
• Providing competent, consistent administration of technical services such as COBRA, Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRAs)
• Reducing internal investments in infrastructure maintenance and development
• Utilizing real-time reporting to manage enrollment, support budgeting, measure carrier/vendor performance and provide greater insight into the operational aspects of the benefits program

For most companies, the key factors that drive the decision to outsource benefits administration come down to cost savings and ensuring compliance with regulatory requirements. In addition, HR/Benefits executive who have time and resource restrictions are realizing that they can rely on those companies that specialize in BAO to provide the resources and expertise to help them and their staffs keep up with future trends. No matter how the decision is being made, it appears that benefits administration outsourcing is here to stay. In fact, according to research by Gartner, Inc., “80 percent of companies now outsource at least one HR activity, and that number is swiftly growing.”

So, how will you decide whether outsourcing benefits administration is right for your company?

A good place to start is by asking your internal staff and business partners the following questions:

• Do we have the appropriate resources and infrastructure to handle benefits administration in-house?
• Do we have the financial support to develop/maintain the skill sets and technology needed to manage benefits administration effectively?
• Do we have the in-house expertise to understand today’s complex regulatory compliance issues?
• Can we continue to manage all of our daily administrative functions whiles also supporting the strategic initiatives necessary for our company to grow?

If you have any questions about outsourcing benefits administration or about Empyrean, comment below. If you happen to be a vendor and would like to contribute to Lockton’s HR Technology blog, please comment below or contact Courtney at clawrence@lockton.com .