With increased CFO involvement in health care and benefit decision-making, benefit managers are under more scrutiny than ever before to ensure they efficiently manage their health and benefits vendor relationships.
The request-for-proposal process is becoming more routine among benefit managers at private companies, according to the Disability Management Employer Coalition, an association focused on educating employers on disability insurance, absence management and return-to-work solutions.
Terri L. Rhodes, DMECs executive director, explains that those responsible for procurement may need educating in order to ensure that their companies are gaining the best vendor partner to offer these benefits. Meanwhile, she says, because so much has changed following the recession and subsequent financial recovery, RFPs are a good strategic move.
I think the landscape and the services capabilities have changed significantly in the last five years, explains Rhodes. If you want to have a good absence and disability program, you need to make sure you have the right vendor partner.
Evaluating cost and pricing efficiency are big parts of the bidding process. Typically, contracts in private and public organizations are bid out every three to five years.
You want to make sure what you are paying for your services is within market, and that changes as well, says Rhodes. There are a lot of business reasons of why you want to take a look at a new vendor.
Patrick Leary, principal benefits manager at Genentech, a leading biotechnology company that is a member of Roche North America, agrees that participating in the RFP process is necessary, especially in todays world of constrained resources and regulatory requirements.
Undergoing an RFP ensures employers are aware of what the market is willing to offer and that vendors arent simply continually updating their pricing for you, explains Leary. Just because you have a three-year rate guarantee, it doesnt mean that your market doesnt take a significant shift in year one or year two, he adds.
Leary says that Genentech and Roche North America, which employ 22,000 workers in the U.S., bid out most if not all of its essential benefits services. In addition to absence management, Genentech will typically call for a market review of medical, dental, vision, life insurance, its flexible spending account vendor, its COBRA vendor, short-term and long-term compensation assistance and its 401(k) provider.
Even for benefit services set to kick off in 2015, such as a new high-deductible health plan to be administered by current health care provider United HealthCare, Leary says it is likely that Genentech will do a market price check to see how vendor prices square up when renewal periods come around in the first two years.
The same way that we are requiring our employees to be engaged consumers of health care, we need to be an engaged consumer of health care delivery, he says. Our model here at the center of expertise for Roche North America is that we should rely on consultants and outside advice as little as possible because we should be informed.
According to Joy-Lynn S. Tyler, director of employee benefits and HIPAA privacy officer at Extended Stay America, contract reviews are a normal course of action.
Every company goes through end-of-contract time review of their current partners and current needs, Tyler explains to EBN. Needs change, obviously, with organizations.
Extended Stay America, which has nearly 700 hotels and almost 10,000 associates across 44 states, recently ran RFPs for seven benefits contracts. Tyler says participating in the review process can serve as an internal audit of services when comparing pricing and future business demand.
In terms of the reasons I went out to RFP in this particular sense, it was to make sure the partners that we were doing business with were still the partners we wanted to continue to do business with in order to help us continue to grow as an organization, Tyler says.
But when it comes to the bidding process, organizational culture and fulfilling company needs is also a vital part of operations. Tyler coins this examination as the employee value proposition. She adds that ensuring communication avenues are open helps to keep employees in the know.
We are very focused on caring for our associates and ensuring that they have the best value from their employer, Tyler says. And being a part of us at Extended Stay, we are able to review the greatest needs, [and] fitting the greatest needs of our associates.
But the greatest organizational need may not be translated in RFPs. Michael Murphy, partner and national sales and marketing leader of Mercers benefits administration business, notes that a good RFP helps to explain to potential bidders the company culture, specific needs, scope of services and what has and hasnt worked in a companys benefits offering.
Also see: 10 steps to streamline your RFP process
While noting that many companies use advisers and consultants to help them effectively procure vital benefits contracts, he explains that benchmarking, RFP issuance and requests for information are becoming more widely used.
There are fiduciary responsibilities that are growing, especially on the private side that just make this even more comprehensive than it used to be, Murphy tells EBN. RFPs are being done for multiple reasons.
Building the business case for services is an essential part of the conversation for benefit managers. On top of recommending that the RFP process include four major steps pre-planning, RFP issuance, analysis and selection Rhodes notes that carrying out the bidding process, while an enormous undertaking, helps to support overall benefits operations to senior leadership and other stakeholders.
The larger clients we work with [more than 10,000 employees] from an administrative perspective do see more involvement in the C-suite, Murphy agrees. He notes that following the ACA, which has invariably made the market explode, he has seen increased chief financial officer involvement in pensions, pension de-risking, as well as in health care and health care cost mitigation.
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