Employers Anticipate Rising Costs in Outsourced Health Benefits Administration

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HighRoads Study Shows Employers Anticipate Rising Costs in Outsourced Health Benefits Administration

Despite Rising Costs, More Employers Considering Outsourced Benefits Administration Due to Health Care Reform

BOSTON--(BUSINESS WIRE)--HighRoads, the industry leader in employer health care regulation compliance, today announced results of a new survey on health and welfare benefits administration. The survey findings show employers anticipate an increase in the cost of benefits administration outsourcing. At the same time, those employers currently managing benefits in-house are increasingly looking to outsourcing to comply with provisions in the Patient Protection and Affordable Care Act (PPACA).

"This can effectively ‘lock-in' a lower price now in exchange for a longer contract. However, if an organization has recently renegotiated with their vendor or made a transition to a new vendor, they should anticipate that costs may go up with renewal."

"In the past six months, there has been a wave of consolidation in the benefits administration outsourcing market which has employers uncertain about their benefits outsourcing fees and ongoing quality of services," said Peter Hirano, principal at HighRoads. "Even so, for those organizations who currently manage benefits administration internally, the increasing complexity of administering benefits, as more guidance and regulations are released, continues to make benefits outsourcing an attractive option. It's a good time for organizations to consider evaluating the effectiveness of their benefits administration and identify alternatives that will enhance their current delivery model while improving cost containment."

Key findings of the HighRoads Health and Welfare Benefits Administration Survey include:

35% of organizations administer their health and welfare benefits internally while 65% turn to outsourcing.
Of those organizations that manage benefits administration internally, 30% say that new health care reform regulations make them more inclined to consider outsourcing, while 69% feel the new law will have no impact on their desire to outsource.
59% of organizations who outsource their benefits administration programs don't know or can't project how industry consolidation will impact their costs or their service over time, while approximately 30% believe they will see higher prices when they plan to renew or rebid their benefits administration work.
Of those organizations who manage internally, the factors that would cause them to outsource benefits administration include:

The ability to react in a quick and cost-effective manner to change requests (27%)
Lowering the cost of service (24%)
Access to better technology (14%)

"From our analysis, organizations that outsource their health and welfare administration and have a contract with associated pricing that was agreed to three to five years ago may have an immediate opportunity to extend or re-negotiate their contract at lower rates," Hirano said. "This can effectively ‘lock-in' a lower price now in exchange for a longer contract. However, if an organization has recently renegotiated with their vendor or made a transition to a new vendor, they should anticipate that costs may go up with renewal."

Sixty two companies responded to the HighRoads survey representing approximately 2.7 million employees. The average respondent had just fewer than 50,000 employees, with the largest employing 275,000 and the smallest with 1,800 employees. Survey respondents represented a wide variety of industries, with 17% in Industrial Manufacturing, 8% in Health Care, 6% in Automotive and Banking. The remaining fell into Aerospace & Defense, Retail and Transportation, Electronics, Food & Beverage, and Leisure.

To request a complete copy of the survey, please contact Petra Marino at pmarino@highroads.com

About HighRoads
The world's largest employers choose HighRoads to gain complete control over their health care costs and compliance. With HighRoads' service, employers have online access to benefits plan information and pricing, competitive benefits benchmarks, and complete benefits supply chain management. The privately-held company is headquartered in Woburn, MA. For more information, visit www.HighRoads.com.

Contacts
HighRoads Company Contact:
Petra Marino, 781-503-4031
pmarino @ highroads.com
or
HighRoads Media Contact:
Erin Jones, 704-664-2170
erinj @ Spiralgroup.com

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