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Outsourcing Health Benefits Grows More Popular

Monday, February 6, 2012
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The Patient Protection and Affordable Care Act's prime objective is to give more Americans access to healthcare. What it may also be doing is fueling a spike in the growth of benefits-administration outsourcing, as employers seek help in navigating recent, and ongoing, healthcare-reform measures.

According to a recent report by Everest Group, a Dallas-based advisory research firm, the global BAO market is growing at a rate of 12.5 percent this year and has crossed the $5-billion mark.

In fact, Everest Group's report, Benefits Administration Outsourcing Annual Report, The BAO Market: Mature Yet Dynamic, found that buyers are outsourcing health and welfare services at four times the rate they are outsourcing pension-related services.

Overall, Everest Group estimates the untapped annual contract value of the $5.4 billion global BAO market is about $20 billion to $22 billion.

"While cost reduction, compliance and improving employee engagement continue to be drivers of BAO adoption, the theme for 2010-2011 was healthcare reform in the United States," says Rajesh Ranjan, research director and a leader of Everest Group's business process outsourcing research program.

Although some changes resulting from the healthcare- reform law are not yet in effect, he says, other provisions are affecting employers now.

Consequently, Everest Group is seeing buyers looking at outsourcing as an option to understand the reforms, navigate the complexities and identify new savings potential. The new law, he says, has made BOA for health and welfare very "dynamic" the past few years.

"Service providers are also investing in creating better communications and decision support," he says.

"If you look at parts of healthcare reform itself," Ranjan says, "it's very complex, so understanding it and how to go about implementing it is challenging. And that has been confounded by ... internal expertise lost during the recession."

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In addition to the complexity are the administrative requirements, says Barbara Drames, vice president of benefits at Oasis Outsourcing, a professional-employer organization in West Palm Beach, Fla.

Drames says the PPACA clearly is pushing more employers, especially smaller and mid-sized ones, to seek more outside help because they don't have the back-office support to meet "all of the different notifications and disclosures needed."

"Now, you not only have the normal benefits process, but healthcare is becoming so much more complex as the PPACA regulations continue to roll out," she says.

And that's not likely to change, says Rohail Khan, executive managing director for total benefits outsourcing at Dallas-based ACS.

Healthcare reform will forever change the landscape of benefits outsourcing, he says, as the complexity of future plan design and delivery to employees will outstrip the ability of organizations to comply effectively.

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