Compliance and cost containment drive outsourcing’s attractiveness.
By Debbie Bolla
To outsource or not to outsource? That is the question a new ADP Research Institute online survey posed to 504 HR decision makers overseeing benefits administration in U.S.-based enterprises. The firm was looking to gauge the interest and reasoning behind outsourcing benefits administration.
No surprise that healthcare reform is a driving factor in the survey’s projection of an increase in benefits outsourcing in the coming three to five years. The need to ensure compliance—and avoid hefty lawsuits, fines and penalties—is making outsourcing a more attractive option, the research finds. Plus more than half of employers think that healthcare reform will make benefits administration even more complex and require more time. Forty-five percent of respondents in mid-sized companies and 54 percent in large companies report that regulatory changes have made them more likely to outsource some or all of their benefits administration, as healthcare reform increases both the complexity and time required to administer benefits. Having a third-party provider with knowledge and expertise is proving its value.
“It’s likely that outsourcing will become more common as compliance becomes increasingly complex with new healthcare regulations in the mix,” says Tim Clifford, president of benefits services at ADP. “Our study shows that many employers view outsourcing as a viable option to help them successfully cut through this complexity.”
Another consideration is cost control. According to the U.S. Department of Labor’s Bureau of Labor Statistics, the cost of healthcare has increased faster than inflation for more than 45 years. Employers are seeking different initiatives to curb the expenses being incurred. Some options include wellness programs, consumer-focused healthcare alternatives, embedded communications, integrated decision support tools, and defined contribution strategies, the survey reports.
For those organizations that have already answered yes to outsourcing, satisfaction levels remain high, notes the research. Outsourcing providers are exceeding expectations for both mid-sized (88 percent) and large (92 percent) companies. Some HR executives are even looking to outsource more: 28 percent of mid-sized companies and 42 percent of large companies report plans to increase outsourced services. But current providers should take heed. This does not mean an automatic increase to their own bottom line. Several HR executives report plans to evaluate the marketplace. Thirty-one percent of respondents in mid-sized companies and 47 percent of respondents in large companies report being at least somewhat likely to change outsourcing vendors within the next 24 months.
