Benefits

ACS Awarded $120 Million Human Resources Outsourcing Contract With Delta Air Lines

DALLAS, Feb. 14 /PRNewswire-FirstCall/ — Affiliated Computer Services, Inc., (NYSE: ACS – News), a premier provider of business process and information technology outsourcing solutions, announced today that it has been awarded a human resources (HR) business process outsourcing (BPO) contract with Delta Air Lines, the United States’ second-largest airline. The seven-year agreement is valued at $120 million.

Under the terms of the new HR outsourcing agreement, ACS will provide a broad range of human resource functions for Delta, including compensation and benefits administration, relocation services, recruiting, learning, payroll, HR Information Services, and employee call center services for Delta’s North American employees and retirees

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Another Big HR BPO Win For Hewitt- Thomson

LINCOLNSHIRE, Ill. –(Business Wire)– Feb. 4, 2005 — Hewitt Associates (NYSE: HEW), a global human resources services firm, announced today it has signed a contract with The Thomson Corporation (NYSE: TOC; TSX: TOC), a global integrated information solutions provider, to provide HR business process outsourcing (BPO) services.

Under a five-year agreement, Hewitt will provide certain HR BPO services in the areas of benefits, compensation, payroll, learning and development and recruiting for Thomson’s 28,000 employees in the United States

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William Gallagher Associates and Genesys Partner to Deliver Best-In-Class HRO and Insurance Brokerage Solutions

Comprehensive Offerings Accelerate Revenue Growth and Offer Clients Flexibility and Choice

METHUEN, Mass. (January 31, 2005 ) – – Genesys, a provider of outsourcing services and software for human resources (HR) management, payroll, benefit administration and payments, self-service, learning, and performance management, and William Gallagher Associates (WGA), a leading provider of insurance brokerage, risk management and employee benefit services, today announced a strategic alliance to deliver best-in-class insurance brokerage and human resources outsourcing (HRO) solutions to customers

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Fidelity to handle HR for BASF

Fidelity Investments said Thursday that has won an outsourcing contract with BASF Corp. to handle that company’s human resources operations.

The five-year contract would have Fidelity conduct BASF’s payroll operations, health and welfare benefit programs and retirement plans for BASF’s nearly 20,000 U.S. employees and retirees. Financial terms of the contract were not disclosed.

Boston-based Fidelity touted the agreement reinforcing increased interest by major corporations to outsource their human resources operations to a single provider. The transition of BASF’s programs to Fidelity’s is expected to be complete by fall 2005, with most services being activate in early 2006.

BASF Corp., with headquarters in New Jersey, is the American affiliate of BASF AG, Ludwigshafen, Germany. It had sales of approximately $9 billion in 2003.


Hewitt Associates Signs Rockwell Automation to a 15-Year HR Services Contract

LINCOLNSHIRE, Ill.–(BUSINESS WIRE)–Jan. 13, 2005–Hewitt Associates (NYSE:HEW), a global human resources services firm, announced today it has signed a 15-year contract with Rockwell Automation (NYSE:ROK) to provide HR business process outsourcing (BPO) services. Rockwell Automation provides industrial automation power, control and information solutions to global 500 corporations.


Under the agreement, Hewitt will provide workforce administration, payroll, health and welfare and defined benefit services to Rockwell Automation’s 15,000 U

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Workplace 2005

Sick celebrities and healthcare cost control.

by Jay Whitehead

In < ?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Americas workplaces, here is one thing you will see a lot of in 2005: An endless parade of celebrities building awareness for their previously hidden diseases. Employers beware. This years hottest topic will be healthcare cost control. HRO can help.

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I was on the phone the other day with Suzanne Somers. You know Suzanne. Ask 100 Americans about her and their top 10 answers would be: The blonde in the car from the movie American Grafitti, Chrissy from Threes Company, The author of Eat Great, Lose Weight, The Thighmaster and Buttmaster infomercial woman, The star of that TV movie Keeping Secrets, The TV host of Candid Camera, Oh, I just bought her stuff on Home Shopping Network, Shes got that family anti-addiction institute, She wrote that hormone book The Sexy Years, and, at the end of the list, Sure, shes a cancer survivor.

 

April 2005 will mark the fifth anniversary of Suzanne Somerss breast-cancer diagnosis. I interviewed her for my new book, which focuses on the new celebrity openness about previously taboo diseases. Somers has been outspoken about how, after surgery and radiation, she avoided chemotherapy by going non-traditional with a homeopathic drug named Iscador. Today, she is cancer-free and speaking to anyone who will listen about the power of awareness in fighting this dreaded disease. She is also urging employers to be understanding about their employees need for a variety of tools to stay healthy, including insurance plans that allow alternative remedies and employer flexibility to deal with the need to heal.

 

How about Mike Milken? Our keynote speaker at last years NY HR Week/HRO World Conference, Milken has single-handedly revolutionized cancer research. After his prostate cancer diagnosis in 1993, Milken threw the weight of both his considerable intellect and wealth at the problem, with dramatic results. Today, while prostate cancer continues to represent 32 percent of all male cancers, more than $485 million annually is committed to prostate cancer research, and cure rates are as high as 85 percent in even previously incurable forms of the disease.

 

And what about singer-songwriter Naomi Judd, a hepatitis C survivor who gave up her career to fight the disease. Today, as she told me in September 2004, she is disease-free and the celebrity spokesperson for the National Liver Foundation.

 

And former Democratic vice-presidential candidate Geraldine Ferraro, who met me a couple of months ago in her high-rise office overlooking Ground Zero in lower Manhattan. Ferraros battles with multiple myelomaa disease also afflicting New York Yankees pitching coach Mel Stottlemyreresulted in Ferraro spearheading a law signed by President Bush in 2003 that allocates $250 million in federal funding to find a cure and promote education about the blood cancer.

 

And Grammy-winner Shawn Colvin, whose recurring bouts with depression caused her to miss several sold-out shows. Colvin met me twice to stump for employer-awareness of the impact of depression on employee performance.

 

There are more: former Los Angeles Lakers basketball star Magic Johnson, whose battle against AIDS has helped convert him from pariah to profit-minded paragon of the virtue of openness. And former President Bill Clinton, whose emergency heart artery bypass surgery late last year caused more than 400,000 Americans to schedule appointments with their doctors.

 

And how could we forget diabetes sufferer Dick Clark, whose diabetes-caused stroke forced him to hand over his annual Rockin New Years Eve show to Regis Philbin. I met Clark late last year in one of the last interviews before his stroke. He made an emotional plea for employer and employee awareness of the signs of diabetes and wanted everyone to know the heart part, as he called it, or the threat of strokes and heart disease from diabetes. His December stroke, unfortunately, helped bring the message home even harder.

 

To date, I have talked with more than 50 celebrities about their previously secret afflictionscancers, neurological diseases, eating and digestive disorders, mental illness, AIDS, heart disease, and diabetes. All of them are coming out of the closet for two reasons. First, openness is good for finding a cure for their disease. And second, because the cost of employee health care is todays most worried- about employer topic. (Note: 64 percent of all Americans get their health care through employers.)

 

At this years HRO World Conference, April 12-13 in New York City, expect health benefits cost control to be a high-profile celebrity-studded topic. And in 2005, expect HRO providers to start putting more effort into controlling both the $1,400 per employee spent annually on administration, as well as the $6,000 to $9,000 per employee spent on health care.  

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Employees Tax-Deferrable Income

When plans compete for it, can employees win?

by Larry Heller

When it comes to tax-deferrable income, employees can win if their employer helps them understand the true value of each type of savings or coverage offered to them, depending on their financial situation and where they are in their career.

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Distinguishing Factors

 

The chart below compares seven common plans. That comparison, plus company matching, use it or lose it provisions, investment performance, flexibility of distribution options, and differences in tax law can make one type of salary deferral more appealing than another. However, it is not only possible but also appropriate that the appeal of one plan over others will evolve over time for any given employee.

 

Choosing a Pre-tax Savings Hierarchy

 

At most ages and circumstances, paying for medical expenses generally comes first. These can be direct payments premiums for medical coverageor indirecta flexible spending account (FSA) or health savings account (HSA). Next will usually be some form of savings, often in a plan offering a company matchlong-term for retirement or nearer-term for education or home purchases. The challenge for many companies is communicating the right information to help their employees choose how deeply to invest in the plan(s) that make sense for them at the time. Ideally, employers should present this information in a way that facilitates easy and regular re-evaluation by employees of their contribution and premium options.

 

The Life-cycle View

 

Employees savings goals change as lives and careers progress. For instance, employees unburdened by homeownership, childcare, or high medical costs might be inclined to save the maximum matchable percentage of their pay in their companys plan. Employees accompanied by children and a mortgage or other debt often find saving for education, home purchase, retirement, and family medical coverage or elder care to be higher priorities. Of course, as employees reach their 50s and 60s, their own age-related increases in medical costs further affect their spending behavior.

 

Can More Options Affect Nondiscrimination Testing?

 

The concern about the magnitude of lower-paid employees 401(k) contributions (relative to those of highly paid) remains relevant. Is the plan already suffering from poor nondiscrimination testing results? Or is current publicity about HSAs steering lower-paid employees away from 401(k) contributions and creating new nondiscrimination tension? Conversely, if the lowest-paid employees are living paycheck to paycheck, are they justified in paying pre-tax premiums for current medical coverage but for little else?

 

As long as employers are able to recognize and respond to these personalized communication challenges with understandable and accessible financial and tax information and guidance, competition among these plans for employees tax-deferrable dollars is a good thing. Then, and only then, will employees be able to properly allocaterather than dilutetheir disposable pre-tax income among employer-sponsored plans

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What Goes Around Comes Around

The changing scope of defined benefit outsourcing.

by Curtis S. Morgan

Once upon a time, the defined benefit (DB) pension plan system in the United States included a large number of plans fully cared for within the insurance marketplace. Insurance companies managed the investment of assets, provided draft or model plans, annuitized benefits upon retirement, and even took on mortality and investment risks post-retirement. Reporting and filing requirements, required communications to employees and retirees, and actuarial valuations were all included in the scope of the services.

However, several factors drove significant portions of the market away from these fully bundled approaches:

ERISA and subsequent regulations made design and operation of the plans more complicated and firmly ensconced the pension consultant as a plan sponsors trusted advisor.

The impact of asset growth and trust investment performance on plan and corporate bottom lines led many sponsors to pull away from insurance companies conservative investments, general funds, and investment and mortality charges. Companies also came to expect their own trusts to perform better than insurance company investment pools.

Declining purchase of defined contribution (DC) plans, growing scale of DB plans, and proliferation of lump-sum options in these plans eliminated the perceived need for insurance companies to assume the mortality risk (and to provide annuity products for DC plans).

The number of plans in the small and mid-sized market decreased dramatically, eliminating much of the insurance industrys market.

In the 15 to 20 years after the introduction of ERISA, most DB plan sponsors built their own infrastructures to support their growing plans. Internal staff typically used rudimentary programs to perform pension calculations for employees leaving or considering retirement. External actuaries provided plan design, compliance guidance, funding results, and certified annual government filings. Separate trustees and investment managers supported the growing trusts and ongoing benefits disbursements. This period was, perhaps, the high point of non-integrated administrative servicing. However, the DB plan was about to begin a migration back out of the halls of the plan sponsor and into integrated outsourced solutions.

Participant service technologycall centers, voice response, Web applications, and robust calculation engines and databaseschanged the pension system from one used to support former employees to an integral element in recruiting, retention, and retirement planning. Plan participants growing expectations of instant access to information, online transactions, and better support led to outsourcing.

Next came the financial reporting nightmares. In the late 1980s, DB plan sponsors became subject to separate financial accounting requirements. During the 1990s, plan assets generally performed well and plan sponsors enjoyed latitude with respect to financial assumptions. This allowed many plans to produce pension income for their sponsors and to continue to improve their funding levels. As long as these trends continued and participant service improved, the benefits department was often the hero. However, the heros welcome came to a dramatic end when the bad investment markets of 2001 to 2002 combined with low interest rates to produce higher reported liabilities on DB plan sponsors books.

Moving into 2005, we see a reversal of the disintermediation trend in the DB marketplace. Plan sponsors at all market levels are looking for providers to assume much of the plans management and devise strategies to minimize associated risks. But there are key differences between now and the days when insurance companies provided fully bundled services. For instance:

The number and type of providers have grown beyond the insurance companies. Other large financial players can offer the investment options and low investment costs that large employers may want along with continual monitoring of the investment mix versus investment policy.

Actuarial services, financial reporting support, audit support, government filings, and other plan management services are being reintegrated as added regulation and focus on financial reporting decreases plan sponsors discretion regarding assumptions and funding levels.

Outsourced administration has removed the plan sponsor from most interactions with plan participants. Communication requirements are integrated into the providers overall administrative solutions. Fully automated electronic solutions continue to replace costly paper and labor-intensive processes.

For many of the remaining (and declining number of) DB plan sponsors, outsourcing many of these interactions to as few providers as necessary is increasingly compelling. In the future, more plan sponsors will retain only the true basicsplan design decisions, plan funding responsibility, and vendor management.

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Renewing Benefits Outsourcing Contracts

Tips for Getting the Most Out of Your Next Contract Renegotiation

by Robert Crow

With many first-generation total benefits and HR outsourcing contracts up for renewal in the next 12 months, employers may be losing money if they arent taking advantage of the changes taking place in the market. Based on our experiences at Watson Wyatt, we have found that one way to improve efficiencies is to drive more employee benefits transactions to the Web. Another tool that employers now have in their favor (that they may not have had several years ago) is several years of data that allow them to renegotiate contract terms based on actual employee usage patterns and customer service trends.

Research shows that many of the companies who first signed HRO contracts five to seven years ago are likely to renew their deals. However, doing so without significant renegotiation could be a serious financial mistake. Many early-stage HRO adopters experienced higher than expected outsourcing costs because of certain elements in their original contracts. Locking in long terms, for example, prevented employers from negotiating lower rates after just a few years. Not including reasonable transition fees in the event the employers population size changed dramatically, also proved to be to employers detriment.

Nowadays, employers have more leverage and information than when they negotiated their first contracts, and they should capitalize on this opportunity to reduce costs and improve customer service. Companies are in a much stronger position due to the consolidation occurring among multiple outsourcing service providers and recent research on usage trends, companies have more leverage in renegotiating contracts.

This makes it a great time for organizations to negotiate their next outsourcing contracts. But lowering costs and improving service quality isnt automatic. Companies must be proactive in their contract renewals to get the most competitive deal.

NEGOTIATING KNOW HOW: FOUR FACTORS TO SUCCESS

SO HOW DO YOU GET THE MOST OUT OF YOUR NEXT CONTRACT NEGOTIATION? BEFORE YOU RE-SIGN ON THE DOTTED LINE, TRY THESE TIPS.

1) Focus on service needs.

With advances in technology and growing employee comfort with Web-based transactions, many of the service provisions necessary five years ago may no longer be needed. Because more workers use the Web to conduct benefits-related transactions, this means fewer employees are calling outsourcers customer service call centers than in the past, lowering the vendors staffing requirements and costs. Companies should capture these types of shifts and potential savings during contract renewal negotiations.

2) Use acquired data.

Original outsourcing contracts were negotiated without much information on usage levels and other factors. Now, after years of data collection, companies have real numbers at their fingertips to help them negotiate contracts that closely align with their needs. By looking at measures such as call volume, content, and call resolution rates over a period of time (12-24 months), companies can better predict future service center usage for leveraging in the negotiations.

3) Solicit stakeholder input.

Input from employees, benefits staff, and other key stakeholders can help companies get a better perspective of actual service quality and cost savings and translate this knowledge into action. If, for example, employees report frustration with long wait times during service-center calls, the new contract should modify existing performance guarantees to address the changing requirements.

4) Consider shorter contract lengths.

By negotiating shorter contracts or contracts that allow for midterm renegotiation, companies can obtain the flexibility they need to update their contract terms to reflect the changing environment. Locking into a long-term contract may not provide the best deal because of reductions in various service charges. Its important for companies to have the option to adjust their outsourcing strategies to use new technologies, incorporate new groups of workers added through mergers or acquisitions, and capture any benefits and savings associated with further consolidation within the outsourcing industry.We have seen a continued reduction in various service charges over the last six years. Because we expect this trend to continue, locking into a long-term contract may not provide the best deal.

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Outsourcing Specialty Pharmacy Benefits

Case Study: Pharmacy benefit management can be the perfect prescription for improved benefits services.

by Jake Murdock

Like many health plans, Deseret Mutual has been facing increasing challenges presented by dramatic rises in the use and cost of specialty drugs. Several years ago, we realized the need for an improved system of managing specialty pharmacy benefits to better control costs and provide a higher level of clinical care support for members who use specialty medications. In choosing a pharmacy benefit manager (PBM) as our specialty drug provider, we found a partner whose experience and capabilities are helping us achieve that goal.

When we began developing our specialty pharmacy strategy, Medco Health Solutions offered consultative support that helped us understand the current state of Deseret Mutuals specialty pharmacy spending and utilization among our plan members. Historically, Medco managed all of Deseret Mutuals pharmacy benefits. When we asked them to look into specialty pharmacy benefits, they were able to provide an analysis of specialty pharmacy spending across our pharmacy and medical plans to give us an increased understanding of the specialty pharmacy challenge. We created a comprehensive plan to align coverage of specialty medications across Deseret Mutuals medical and pharmacy benefits and to provide new services through Medcos Special Care Pharmacy program.

The extraordinary expense of specialty drugs makes proper management essential to ensure that patients who need these treatments receive them, while having systems in place to prevent potential underuse, overuse, and waste of these medications. By selecting a PBM with vast experience in utilization management, Deseret Mutual was able to ensure that the same tools used to control utilization of traditional pharmaceutical products would also apply to managing specialty drugs. This includes prior authorization, step therapy, and product selection strategies. By working withour PBM, Deseret Mutual is better able to identify those members that will truly benefit from specialty therapies and those that may benefit from a more cost-effective therapy.

Deseret Mutual realized significant savings by requiring that select specialty drugs be dispensed through the PBMs specialty pharmacy. By doing so, we have been able to bring consistency to the pricing and utilization management of specialty drugs under the pharmacy benefit without compromising the services and quality of care available to members.

Controlling costs is a major concern, but equally important to Deseret Mutual is a specialty pharmacy that can provide the most comprehensive clinical care for our members. Medco offers the advantage of being able to look across a patients entire prescription drug profile and find out if traditional or specialty drugs are being used. This is particularly important for specialty patients, who are often also prescribed traditional medications for conditions associated with a disease that requires specialty treatment.

There are additional advantages to having all our pharmacy services provided under one roof. Through Medco, we are able to offer a coordinated approach to managing all of a members pharmacy needs. Having a single point of contact makes the system much more streamlined and less complicated for both physicians and patients. Physicians can order both specialty and traditional medications from the same source, and, at the same time, obtain comprehensive patient prescription information while qualifying the member for coverage under prior authorization. This coordinated system also improves patient careour PBMs specialty pharmacists and nurses work closely with Deseret Mutuals case managers to coordinate patient support services.

Administration for all out pharmacy benefits is also simplified by working with a single point of contact. When using stand-alone specialty pharmacies, plans must often manage multiple specialty pharmacies in order to provide members access to the wide array of specialty products in the market today. Many of these niche specialty pharmacies focus only on a limited number of conditions or products. However, our PBM gives us access to the services and drugs needed to provide our members with a comprehensive specialty drug benefit plancreating a much more efficient system that has helped us reduce administrative time and costs associated with specialty benefits.

Deseret Mutuals experience shows that by working with a PBM that offers specialty benefit management services, we can provide members using specialty medications with high-quality care in a cost effective manner.

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