Open Enrollment Tools Evolve Vol. 56 No. 7

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1 Open Enrollment Tools Evolve Vol. 56 No. 7 Technology is available for even the smallest employers to automate open enrollment. 7/1/2011 By Bill Roberts By automating open enrollment with technology, a restaurant company with 1,850 employees reduced errors in its annual benefits sign-up to less than 1 percent, down from as much as 5 percent in paper-processing days. The benefits and HR manager of a heavy equipment company with 350 employees now spends less than half the time she once did on open enrollment after moving from paper to a technology platform. And a manufacturer with 2,500 employees saves more than $400,000 per year, thanks to an open enrollment platform. What s not to like? An open enrollment platform is a technology that can transform human resource operations from "looking like the registry of motor vehicles to looking like Netflix," says David O Connell, principal analyst at Nucleus Research Inc. in Boston. Most large employers outsourced benefits administration a long time ago; as technology improved, providers began using software and the Internet to automate open enrollment and other benefits-related processes. These outsourcing agreements are typically large, multiyear deals that include services such as call center support and that are feasible mainly for employers with thousands of workers. Payroll processors and other vendors now offer open enrollment solutions for smaller companies, providing some of the benefits of automation that large employers gain from outsourcing. "This whole vendor segment is emerging," says Jamie Hawkins, president of Benefit Technology Resources LLC, a consulting firm in Tampa, Fla., that helps small and medium-sized employers choose benefits platforms. Hawkins advises customers to exercise due diligence when selecting a vendor: "Do your homework. Pay attention to the back end, not just the pretty face. See how it works. Look at the security of it. Ask for what you need." Get deliverables in writing. More from this issue HR Magazine homepage Web Extras SHRM article: Tech- Based Communications Provide Open Enrollment Boost (SHRM Online Benefits Discipline) SHRM article: Start Spreading the News (HR Magazine) SHRM article: Automatic Enrollment for Large Employers to Kick In (HR News) SHRM video: Jennifer Benz, CEO of Benz Communications, discusses the use of social media for benefits communication Case study: Return on investment at Morganite Industries Inc. in Raleigh, N.C. (Nucleus Research Inc.) New Trends Few large employers still use paper for open enrollment. In a survey of 209 U.S. employers in December 2010, less than 9 percent used paper, down from 14 percent the previous year, Towers Watson found in an annual survey. Company size ranged Print this page to a friend

2 from 2,000 employees to more than 100,000, with an average of 14,000, says Rich Nicholas, a senior consultant in Towers Watson s outsourcing group. The survey sample included organizations that outsource and those that use other solutions. The research shows that if these employers do not outsource but do use technology, they no longer buy and install it on their premises. Most either outsource or use the technology as software-as-a-service (SAAS), Nicholas says. Large outsourcing providers such as Aon Hewitt, Fidelity, Towers Watson and Mercer built or acquired software platforms that give clients employees an automated, self-service experience. The first versions of these open enrollment platforms handled basic transactions and workflow. Modeling tools to assist with decisionmaking and health care content came later. Today, these platforms offer increasingly more interactive health care and wellness content. Blogs, videos and other Web 2.0 tools, plus mobile access, help HR professionals communicate open enrollment information to employees. Large outsourcing providers platforms are highly integrated and include the insurance carriers systems and the clients payroll software. Now, there are similar options available to mid-size and smaller employers from a bevy of providers. More Choices Hawkins works with companies that have a maximum of 10,000 employees; most are much smaller than that. She estimates that 60 percent to 70 percent of employers in this mid-size and smaller market still use paper for open enrollment. Based on her study of the market, Hawkins cautions that benefits technology is a diverse and potentially overwhelming segment to buyers. She estimates that 70 to 100 vendors offer various solutions but not always exactly the same products and services, making comparison difficult. In her opinion, a much smaller number of providers are serious players. HR clients are often bewildered by the selection process because they "don t do this every day and it is hard to do," she says. Among available options: Some existing human resource information system developers of both older generation and newer SAAS-based models offer, or soon will offer, technology for benefits enrollment and administration. Some existing payroll providers have acquired or built open enrollment front-ends that work with their payroll software but that don t always interface with other payroll software. A growing class of vendors offer benefits platforms through insurance carriers and the broker community. Some now offer these directly to employers. Hawkins cautions buyers not to be wowed by particular features on any platform until they understand what the platforms can and

3 cannot do. Document what you need in a request for proposal. Then, "Use a consultant or do it yourself, but get the vendor to respond," she says. Ask about: Billing reconciliation. Building spreadsheets. Processes around evidence of insurability. Integration with payroll providers. Be hyper-vigilant about security and data management. Hawkins says many vendors may not meet basic security expectations. Payroll Extension If your company already has a satisfactory relationship with a payroll provider that offers benefits enrollment, explore that option. With 350 employees, Modern Group Ltd. in Bristol, Pa., sells, rents and services forklifts and other construction equipment at 10 dealerships in Pennsylvania, Delaware and New Jersey. Modern Group began using technology from CheckPointHR LLC in Edison, N.J., for payroll in 2004, according to Heloise Schieber, benefits and HR manager. CheckPointHR provides web-based HR management tools, including payroll and benefits administration, for small and medium-sized companies. For benefits, CheckPointHR provides the platform and serves as broker. "We negotiate health insurance rates, handle all facets of open enrollment and update payroll deductions," says Tim Padva, chief executive officer. After two years of using CheckPoint!HR s payroll product, Modern Group adopted its benefits service when paper administration became too burdensome. "When we were on paper, it was just insane," Schieber says. "Having employees do it online is a big time saver for me." Padva says 80 percent of his payroll clients use the benefits platform and service. Negotiating a Deal Grill Concepts Inc., headquartered in Woodland Hills, Calif., owns 29 restaurants, including The Daily Grill and The Grill in the Alley groups, and employs 1,850 people. The company uses Bene!Trac open enrollment technology that is offered through its insurance carrier, says Chris Gehrke, vice president of HR. BeneTrac, a subsidiary of Paycheck Benefits Technology Inc. in San Diego, sells to insurance brokers and carriers, who then offer the platform as a service to customers, says Chris Knight, western region field sales manager. The vendor has end users ranging in size from 50 to 5,000 employees, but "our average-size end user customer is about 300 employees." He says companies that size usually work with a broker.

4 A couple of years ago, when Grill Concepts was seeking a new insurance carrier, executives looked into a benefits enrollment option from its payroll provider but passed because of cost, Gehrke says. Company leaders were aware of BeneTrac s cost model because Grill Concepts previous carrier had used BeneTrac, although the restaurateur had never used it, Gehrke says. As negotiations progressed, the new carrier decided that adding BeneTrac would clinch a deal with Grill Concepts and reduce its costs. Grill Concepts has used BeneTrac for two open enrollment cycles. In paper days, errors ranged from 2 percent to 5 percent. With BeneTrac, the error rate fell below 1 percent, Gehrke says. The software does not connect seamlessly to Grill Concepts payroll system HR staff download spreadsheets from one system and upload to the other yet the company s HR professionals are generally pleased with the technology. "One step and you re done," says Melinda Shafran, HR generalist for benefits. "Let s say you terminate benefits. You terminate it once and the system distributes to everyone. You don t need to go to dental, medical, COBRA, life insurance. You notify one place, and it tells all carriers. That s huge." Better Benefits Communication Employers are slowly adopting new technologies, including social media tools and videos, to support employee communications for open enrollment. But they still rely most heavily on . In a survey of open enrollment trends conducted in December 2010, Towers Watson found that more employers than in past years use technology and face-to-face meetings to communicate with employees about open enrollment. The findings are based on responses from 209 U.S. employers. Specifically, 84 percent used , compared with 76 percent the previous year, and 60 percent used face-to-face meetings, compared with 53 percent. Thirty-three percent of the respondents used videos, podcasts and online chats, compared with 27 percent the previous year. Only 4 percent used blogs or other social media tools. Jill Radding, manager of benefits and employment at Rex Healthcare in Raleigh, N.C., sends daily reminders to about 5,000 employees during open enrollment season. "We also send out links to information on our home page," she says. Rex Healthcare uses software from Benefitfocus.com Inc. as its open enrollment platform. Jennifer Benz, chief executive officer of Benz Communications, a social media consultancy in San Francisco, sees growing interest in social media tools for benefits communication.

5 interest in social media tools for benefits communication. Some employers are getting creative in their approaches to benefits communication. Trustnode Inc., a three-year-old startup in San Francisco, develops decision support tools based on animated stories designed to educate employees on benefits. Research conducted at Stanford University has shown animation to be a useful educational tool with high viewer recall, according to Kevin Dunn, founder and CEO of Trustnode. The 54,000-member New York Public Employees Federation, an association of technical and engineering employees, is among the early adopters. Beth Wales, marketing executive for voluntary membership benefits, says the association is testing animated features. "There is science that explains why people relate to cartoon characters that exaggerate human behavior," she says. Some providers of online enrollment technology are adding communication features to their platforms. Benefitfocus offers a messaging center that allows employees to ask questions privately or publicly. Benefitfocus has produced 300 videos for its portal that customers can use. It can also develop custom videos for a separate fee, according to Nancy Sansome, senior vice president of marketing and communications. Sansome says the company is also developing other features, including access from mobile devices as well as a rating and ranking feature similar to the one Amazon uses for books to allow employees to grade benefits providers. Rex Healthcare s Radding says the company doesn t use any Benefitfocus features yet, but podcasts and webinars, probably developed internally, are "on the list for next year." Bill Roberts Real Money Testimonials about saving time are persuasive, but nothing beats cold cash. Morganite Industries Inc. in Raleigh, N.C., makes ceramic electrical supplies and carbon graphite products. The employer achieved cost savings when it adopted technology from Benefitfocus.com Inc. in Charleston, S.C., for open enrollment of 2,500 employees who work at 10 locations in the southeastern United States. Benefitfocus started like BeneTrac did, selling to insurance carriers. Two years ago, it began selling directly to employers with 1,000 or more workers, according to Nancy Sansome, senior vice president of marketing and communications. The company s SAAS offering covers open enrollment transactions and connections to payroll and insurance carriers. Benefitfocus has been developing tools to improve the employee experience. The software also performs call center functions for customers. Nucleus Research Inc., an independent organization offering studies of technology s return on investment accredited with the

6 National Association of State Boards of Accountancy, determined that Morganite s accrued savings paid for deployment of the platform in seven months, and the company now saves an average of $438,418 annually on its open enrollment process. O Connell lists three reasons for the savings. The first two are obvious: By moving the process online, Morganite employees and HR administrators became more productive by saving time, and a hard dollar savings can be attached to these productivity gains. The third reason is less obvious but produces the largest savings. The application enables an "eligibility audit." The first audit allowed Morganite to identify 100 unqualified people ex-spouses of employees, for example whom the company dropped from benefit rolls. Better Benefits Communication Employers are slowly adopting new technologies, including social media tools and videos, to support employee communications for open enrollment. But they still rely most heavily on . In a survey of open enrollment trends conducted in December 2010, Towers Watson found that more employers than in past years use technology and face-to-face meetings to communicate with employees about open enrollment. The findings are based on responses from 209 U.S. employers. Specifically, 84 percent used , compared with 76 percent the previous year, and 60 percent used face-to-face meetings, compared with 53 percent. Thirty-three percent of the respondents used videos, podcasts and online chats, compared with 27 percent the previous year. Only 4 percent used blogs or other social media tools. Jill Radding, manager of benefits and employment at Rex Healthcare in Raleigh, N.C., sends daily reminders to about 5,000 employees during open enrollment season. "We also send out links to information on our home page," she says. Rex Healthcare uses software from Benefitfocus.com Inc. as its open enrollment platform. Jennifer Benz, chief executive officer of Benz Communications, a social media consultancy in San Francisco, sees growing interest in social media tools for benefits communication. Some employers are getting creative in their approaches to benefits communication. Trustnode Inc., a three-year-old startup in San Francisco, develops decision support tools based on animated stories designed to educate employees on benefits. Research conducted at Stanford University has shown animation to be a useful educational tool with high viewer recall, according to Kevin Dunn, founder and CEO of Trustnode. The 54,000-member New York Public Employees Federation, an association of technical and engineering employees, is among the early adopters. Beth Wales, marketing executive for voluntary membership benefits, says the association is testing animated

7 features. "There is science that explains why people relate to cartoon characters that exaggerate human behavior," she says. Some providers of online enrollment technology are adding communication features to their platforms. Benefitfocus offers a messaging center that allows employees to ask questions privately or publicly. Benefitfocus has produced 300 videos for its portal that customers can use. It can also develop custom videos for a separate fee, according to Nancy Sansome, senior vice president of marketing and communications. Sansome says the company is also developing other features, including access from mobile devices as well as a rating and ranking feature similar to the one Amazon uses for books to allow employees to grade benefits providers. Rex Healthcare s Radding says the company doesn t use any Benefitfocus features yet, but podcasts and webinars, probably developed internally, are "on the list for next year." The author is technology contributing editor for HR Magazine and is based in Silicon Valley in California. Reprints and Permissions Society for Human Resource Management 1800 Duke Street Alexandria, Virginia USA Phone US Only: (800) 283-SHRM Phone International: +1 (703) TTY/TDD (703) Fax (703) Questions? Contact SHRM Careers SHRM 2011 SHRM. All rights reserved.