Introduction
Most human resources professionals can easily pinpoint the advantages of benefits management solutions. These systems are designed to help HR automate benefits eligibility, reduce manual processes, streamline enrollment and simplify benefits communication. However, quantifying the hard and soft dollar savings that will result from the investment in technology can be a daunting task.

Building an effective business case to make the transition to an automated system must feature a detailed analysis of current benefits administration costs. It also needs a clear description of how the new system will improve the delivery of your benefits program, increase the efficiency of administration, enhance service to employees and, ultimately, impact your company’s bottom line.

 

How is Your HR Team Spending Its Time?

According to the Society for Human Resource Management, 60 to 80 percent of HR staff time can be linked to repetitive administrative tasks. Consider the variety of functions that your HR team performs:

• Benefits communication
• Benefits inquiries
• Eligibility management
• Annual enrollment
• Life and employment event processing
• New hire processing
• Carrier/vendor management
• COBRA/HIPAA administration
• Systems and technology support

How do you determine the true cost of these functions? What would you do if your HR team had 60 to 80 percent more time to dedicate to other initiatives? A closer analysis reveals 5 steps that can help you measure your current performance and demonstrate how an automated benefit management solution will significantly reduce time and money spent on administration tasks.

Step 1: Show How Online Benefits Communication Saves Money

How much time and money does your team spend each year on benefits communication? The numbers may surprise you. Do you distribute annual benefits booklets? If so, you’ll need to take into consideration the design and printing costs as well as any costs associated with the distribution of booklets to employees. Do you send benefits confirmation statements? If so, you’ll need to factor in the ongoing costs for these highly personalized materials.

For example, a company with 2,000 benefit-eligible employees may produce a benefits booklet that costs $5 per employee or $10,000 a year – just for design and printing. Sending benefits confirmation statements may cost an additional $2 per employee to design, print and mail – or an extra $8,000. As you review your current benefits communication costs, include the design, printing and storage costs for other publications such as new hire packets, summary plan descriptions (SPDs), benefit plan comparisons, company handbooks, open enrollment documentation and reminder letters plus other materials.
Posting benefits information online significantly reduces or eliminates benefits communication costs, saving your company thousands of dollars a year. Moreover, employees prefer 24/7 self-service access to the most current benefits information and elections.

If you currently communicate using an internal intranet site, you may also want to ask yourself:

• How many HR and IT resources are involved?
• How much time is spent developing and testing the site?
• How easy is it to make content changes? How quickly can changes be made?
• Do employees view only those benefits for which they are eligible?
• Can employees visit one intranet site or must they wade through multiple carrier sites to find benefits information?

If your benefits management solution features benefits communication tools, factor in the time you and your IT staff will save by outsourcing the posting of your HR and benefits information. Also note the convenience factor for employees who have the ability to visit one source for benefits information versus employees who spend time clicking to multiple disparate links searching for SPDs or other details.

 

Step 2: Demonstrate a Decrease in Benefits Inquiries

One of the biggest advantages of posting benefits information online is fewer calls to HR. To measure the number of current benefit inquiries your HR team receives, look at the amount of time your HR team spends on a typical benefit question. For example, after an employee calls HR, a member of your team will research the issue and then contact the employee with the answer. While this whole process may take only about 30 minutes, take into account that your employees ask hundreds of benefits questions each year. In this case, let’s estimate that each employee asks one benefit question per year. For a company with 2,000 employees, that’s 1,000 hours. Multiply that by an employee’s hourly rate ($20/hour) and you’ll see that this company spends $20,000 a year just to answer benefits questions.

 

Posting benefits information online dramatically reduces the number of questions HR receives. In fact, most HR departments can easily justify the cost of posting benefits information online because they can now eliminate the cost of hiring temporary help during annual enrollment. Now, rather than answering routine questions about benefits, HR can dedicate more time to addressing employee benefit concerns.

 

Step 3: Describe How Automated Eligibility Saves on Benefit Costs

Most employers admit that it’s extremely challenging to track all their employees and dependents to ensure that all participants are eligible for coverage. Estimating the number of ineligible participants and resulting claims overpayment costs can be difficult and even embarrassing for most HR teams to admit. Yet it happens in even in the best of companies. In a 2004 dependent audit, Daimler Chrysler, for example, found 27,000 of its employees who had ineligible family members on benefit policies. Ford Motor has found 50,000 ineligible dependents since the year 2000. Industry estimates show that, on average, 7 to 15 percent of plan participants may be ineligible for coverage.

 

Just one ineligible participant could cost $2,000 or more a year. For a 2,000-employee company, if 7 percent of employees have an ineligible participant, there are 140 people who shouldn’t have coverage and $280,000 in premium and/or claims overpayments annually.

 

Benefits management solutions can significantly reduce and even eliminate premium and claims overpayments by automating eligibility rules. As a result, each employee views only those benefits, plans and rates for which he/she is eligible. Make sure your system can prevent an employee from inadvertently signing up an ineligible participant for benefits and, over time, your system will significantly lower your premium and claims overpayment costs.

 

To discover any ineligible dependents who are already on your benefit rolls, a dependent audit may be necessary. These cost-effective audits can save employers thousands of dollars in benefits costs each year. Implementing post-audit controls can also help ensure that your company’s benefit dollars are being applied to authorized employees and their dependents.

 

Step 4: Illustrate How Online Enrollment Saves Time and Increases Participation

What’s the true cost of enrollment? For companies that conduct enrollment via paper, consider that HR must distribute benefits information, process and track enrollment forms. For a company with 2,000 benefit-eligible employees and 10 benefit plans, HR must manage up to 20,000 pieces of paper – even before enrollment begins. When determining open enrollment costs, think about the amount of time spent preparing for annual enrollment, communicating enrollment to employees, managing employee questions during the enrollment period and following up on employees who fail to enroll.

 

With an automated benefits management solution, costs related to the printing, distribution and management of paper forms are eliminated. Using online tools, HR has ability to monitor employee enrollment and track employees who need to complete the process. Because online solutions offer easy, one-stop access to information and present all applicable benefit options to employees, most online systems bring the added bonus of increased plan participation. This is especially pertinent with respect to Section 125 and 401K plans—as the employee’s taxable income is reduced, the company saves on FICA expenses which can generate astounding savings.

What about employees who may not have access to the Internet? If you currently enroll employees using a benefits call center or IVR system, factor in the cost of these centers and compare them to the cost of outsourcing these services. Chances are, outsourcing will not only save you money but also offer more services for your company such as extended call center hours, support for multiple languages as well as help desk and password support for online employees. If enrolling over the phone, check to ensure that employees are speaking with a live person versus an automated system and that elections taken over the phone are entered directly into your online system.

 

Step 5: Explain How Automated Event Processing Saves Time

If you currently use software or an enrollment-only system, remember that enrollment is more than just a once-a-year event. Your HR staff spends a lot of time processing benefit changes that result from a life- or employment-related event such as a birth, marriage or relocation. This may include answering employee questions about the event, collecting forms or event documentation and transmitting benefit changes to all affected carriers.

 

When measuring the time to process events, estimate the percentage of annual status changes. In this example, let’s assume that a company with 2,000 employees has about 20 percent of its employees experience a life or employment event each year. Given this, you can estimate that HR will manage at least 400 events annually. If each event takes an hour to process, that’s 400 hours or nearly 20 percent of a staff member’s time.

 

Benefits management solutions automate the processing of enrollment events and should be able to maintain a record of employee events, track employees as they progress through the process, remind employees to submit forms or event documentation and allow self-service enrollment. As a result, your staff member can now spend this time on other initiatives such as implementing a wellness program, working to reduce claims or other efforts that could result in a reduction in carrier premium costs.

 

But Wait! There’s More…

As you work to gain management commitment for your project, take some time to learn how these systems can turn soft dollars into hard savings. The steps presented above represent just a few of the ways that benefits automation can help your HR team. There are many others including:

 

• Greater flexibility in making benefit plan changes
  With an online, rules-based system, it’s fast and easy to make annual benefit plan and rate changes, giving your company more time to negotiate the best price with carriers.
• More control in managing carrier relationships
  Online benefits communication and rapid implementation tools not only lower the cost of making carrier changes but also the amount of time it takes to implement a new carrier. Some systems can accommodate a carrier switch just days before enrollment.
• Easy access to benefit utilization reports
  Rather than relying on carriers for employee election data, benefits automation puts you in control with 24/7 access to enrollment and billing reports.

As you develop your business case, bear in mind that your service provider may offer tools designed to quantify your return on investment. These tools can help you speed the decision-making process, reap the rewards of benefits automation and save time, reduce costs and improve service to employees.

This article is an abstract from 9 Steps to ROI Success for Your Benefits Management Solution by RealLife HR. Serving companies with 2,000 or more employees, RealLife HR provides innovative Web-based benefits management solutions that automate benefits communication, enrollment and ongoing administration. To download a complete copy of the article, visit http://www.RealLifeHR.com/ERS.