Health care reform and the related compliance complexity are causing more employers to consider outsourcing the benefits administration, according to a new survey from ADP, a provider of human resources management, payroll and benefits administration services.
Of these respondents, 45 percent of respondents in mid-size companies and 54 percent in large companies cite that regulatory changes have led them to become more likely to outsource some or all of their benefits administration. Ensuring compliance is one of the primary reasons respondents outsource benefits administration at 54 percent of mid-size companies and 49 percent at large companies. Respondents also say they do so in order to rely on subject matter knowledge and expertise at 50 percent of mid-size companies and at 41 percent of large companies as well as to cut the administrative burden on internal staff at 43 percent of mid-size companies and at 50 percent of large companies.
“It’s likely that outsourcing will become more common as compliance becomes increasingly complex with new health care 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.”
Besides health care reform, compliance is becoming increasingly demanding regarding the Sarbanes-Oxley Act, Health Insurance Portability and Accountability Act, Consolidated Omnibus Budget Reconciliation Act, Family and Medical Leave Act, Americans with Disabilities Act and Age Discrimination in Employment Act, Clifford says. In today’s environment where new regulations are issued or previous ones are amended, the challenge for employers is expected to continue.
Most respondents say their outsourcing providers have met or exceeded expectations at 88 percent of mid-size companies and at 92 percent of large companies. Another 80 percent of respondents at mid-size companies and 91 percent of respondents at large companies agree that outsourcing even some components of benefits administration offer real value for employers and have reached several of their goals.
The survey also shows that 41 percent of respondents at mid-size companies plan to keep their benefits administration in-house because they believe it is easier to do so while only 21 percent of respondents at large companies do for the same reason. Instead, 48 percent of respondents at large companies say they are most likely to administer benefits in-house in an effort to maintain control as opposed to 29 percent of respondents at mid-size companies.
According to the survey, COBRA administration, flexible spending account administration and 401(k) administration are the most outsourced components. By outsourcing these services, 65 percent of respondents say this allows employees to focus on their core businesses or strategic issues. When identifying an outsource provider, cost of services ranks as the most important consideration by 71 percent of respondents at large companies and 72 percent of respondents at mid-size companies.