Is Outsourcing Employee Benefits the Right Solution? Presented by Susan King, Sr. Vice President, Aon Consulting

Transcription

1 December 12, 2007 Is Outsourcing Employee Benefits the Right Solution? Presented by Susan King, Sr. Vice President, Aon Consulting 1

2 Agenda What Are the Primary Sourcing Options? Benefit Administration Solutions Under Different Sourcing Options Why Consider Benefit Administration Outsourcing? What Will You Outsource? Building a Business Case for Outsourcing Selecting an Outsourcing Partner Sample RFP Process RFP Overview Basic Structure Scope of Services Sample Categories Questionnaire General and Specific Provider Qualities 2

3 Primary Sourcing Options In sourced/outsourced Strategy Design/Costs/Contributions Administration (including new hire, enrollment and termination benefit functions) Policy and Process Technology/Systems Management Data Management Compliance Communications Participant Support Service Procurement Management (Vendor, Project, Staff, Budget ) Financial (Billing, Reporting) Co-Sourced Administration (including new hire, enrollment and termination benefit functions) Policy and Process Technology/Systems Management Data Management Compliance Communications Financial (Billing, Reporting) Management (Project, Vendor) 3

4 Sample Benefit Administration Solutions Under Different Sourcing Options In-sourced administration: Typically involves a benefits module attached to an enterprise system, HRIS or payroll system providing administration recordkeeping system and self-service tools needed. Internal benefits staff or an internal service center (could be a benefit specific or function as part of a larger shared service center) would perform most administrative tasks including data collection, transaction input, processing of data feeds, and participant support services. Internal staff and/or external vendors would provide strategy, design, funding, compliance, communications, procurement and overall management. Co-sourced administration: This structure requires organizational staff to perform most administrative tasks including data collection, transaction input, processing of data feeds, and participant support services. An external third-party provider would supply an administration recordkeeping system and self-service tools. Internal staff and/or external vendors would provide strategy, design, funding, compliance, communications, procurement and overall management. Total outsourced administration: All administration (data input, data processing, and participant services), participant support services and varying levels of strategy, design, funding, compliance, communications, procurement and overall management would be performed by a third-party organization. 4

5 Why Consider Benefit Outsourcing? Reduce Costs Organization Directive to Outsource Non-core Business Functions Process Improvement Data Management Compliance Requirements Staffing Limitations Need for Ongoing Technology Upgrades and Maintenance Provider Consolidation 5

6 What Will You Outsource? All Benefits or Selected Programs Health and Welfare Medical, Dental, Vision, Rx, Life, AD&D, Disability Retirement Defined Benefit, Defined Contribution Specialty FLMA, COBRA/HIPAA, Spending Account Administration, HMO Eligibility and Billing, Voluntary Benefits All Functions or Limited Functions Strategy and Design Administration Policy and Process Technology/Systems Management Data Management Compliance Communications Financial (Billing, Reporting) Participant Support Services Procurement Management (Vendor, Project, Staff, Budget ) 6

7 Building a Business Case Needs Assessment Marketplace Analysis Conduct interviews with stakeholders to assess issues, document current processes, staffing, data needs and flows, costs, services desired, appetite for change Gather market data to assess assess current state Identify potential vendors for outsourcing services Objectives and Desired State Define outsourcing objectives and desired state Set assumptions for desired state Model Changes Other Items Model changes needed to reach desired state determine what should be done before and after outsourcing (Data clean up, process changes, communications, staffing requirements etc.) Possibly conduct RFI to explore capabilities and cost estimates Be sure to include implementation costs, additional costs if broader services desired, staffing requirement changes that may require retraining or new staff, out-of-scope budget 7

8 Selecting a Partner Sample Process RFP Processes Procurement Requirements Use of Outside Consultant Selection Committee Selection Criteria RFP Development/Review Eligible Providers Selected RFP to Providers Proposal Review and Finalist Selection Finalist Meetings Scope and Fee Refinement and Negotiations Select Partner 8

9 Selecting A Partner Basic RFP Structure Detail Current State and Desired State Scope of Services with Capability Indicators Fee Grid Implementation, Ongoing, Change Parameters, Optional and Out-of-scope pricing, Travel/Entertainment, Taxes, Fees at Risk General and Specific Questionnaire Contract Requirements, Technology and Privacy Requirements, Quality Metrics 9

10 Scope of Services Sample Categories Detailed activities, transactions to be provided be very specific and include all custom/unique services Include how you want the activities to be handled Timing of activities Contractual requirements Financial/audit requirements Service team requirements Yours and Participants Technology/Privacy requirements Compliance requirements Communication requirements Include updates to technology, services within scope Quality metrics Capability Indicators: Currently Offer as Requested and Included Currently Offer but Delivered Differently than Requested (describe how different and if can be delivered as requested at same cost) Don t Currently Offer but Could Build/Buy as Requested (how much to build/buy and when can be delivered) Don t Currently Offer and Don t Plan on Offering 10

11 Questionnaire General and Specific General Firms background including any subcontracting, partnership, alliance or outsourcing relationships to deliver services, financials and future investments in services, technology, people Proposed teams structure, accountability, experience, stability, account team project experience as a team, participant team training Detailed project plan Communications to be included details and samples any customization Continuous improvement in processes, technology and services demonstrate, provide frequency and if included Quality assurance in processes, with teams and how breaches are handled Security of data and technology requirements Self-service capabilities and coordination/integration with your systems Reporting capabilities Eligibility, billing and reconciliation services Termination services Specific How will team handle implementation and suggestions for making change - provide alternatives, timing and financial savings Issue resolution how do you want to be communicated with concerning issues Unique activities or benefit plan requirements can they accommodate and exactly how - if manually how will activity be monitored Team requirements for account management and participant services minimize turnover, experience level required, service expectations and fees at risk if not met Company specific contractual, financial, compliance, technology or security requirements M&A impacts how handle acquisition or divestiture detail activities, timing and describe impact on fees Reporting requirements detail what is needed when 11

12 Outsourcing Partner Qualities Core and Growth Business Service Offerings Exceptional people Administration as a core business line Ongoing investments made to grow administration business, services, technology and people Gain savings and efficiencies through implementing cross functional solutions Receive favorable contractual and financial arrangements Ability to deliver greater returns for investments It s all about people Create true partnership Relationships with stakeholders and executives increase their vested interest and facilitate change/approval processes Continuous Improvements Nothing should remain status quo Formal process to create additional opportunities and foster relationships Adjustments to service and delivery model to drive results 12

13 Questions? 13