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Fast-forward to three months later. Bill’s youngest child needs braces. The costs will be covered by his employer’s generous dental plan, but Bill has to submit the claim manually.

Three weeks pass and Bill still hasn’t been reimbursed for the dental expenses. When he calls to inquire about the status of his claim, the call centre representative tells him there is no record of him as a plan member; therefore, his claim has been rejected. The representative suggests that he speak to his plan administrator—forgetting to add new employees or dependents to benefits policies is a common HR mistake. Bill hangs up the phone and rushes to the HR manager’s office. She’s on the phone, so he sits down across from her. That’s when he notices his paperwork on her desk—in the same spot where he left it months ago.

Fortunately, with advances in technology, there are fewer cases like Bill’s. Technology has made the administration of group benefits more efficient. It’s changing how employers manage their benefits plans and their workforces, and how insurers do business. And it will soon change how other health providers operate.

Who’s Connected

With employers constantly looking for ways to streamline processes, cut costs and increase productivity, many are turning to automated solutions for benefits administration. “Today, we see about 85% of new case sales using electronic enrollment, billing and fund transfer for bill payment,” says Brad Fedorchuk, vice-president, group marketing, with Great-West Life.

Plan sponsors have a variety of options when it comes to benefits plan administration. If they choose to outsource, employers can hire their insurer (many offer plan administration services), or they can use a thirdparty administrator (TPA). Some consulting firms also offer plan administration. If plan sponsors choose to self-administer, they can often gain access to their insurer’s systems via the Internet and simply use the insurer for support. This is the route that many smallersize employers take. TPAs and consultants are also able to gain access to the insurer’s systems and do the administration on behalf of the plan sponsor in outsourcing situations.

Larger-size employers that outsource often have their own administration systems and are able to send data feeds with up-to-date information to their insurers or TPAs. Pierre Neatby, leader of Canadian outsourcing business with Mercer, says that from his experience, most medium to large companies outsource administration. Although some large companies may have their own team of benefits experts in-house, this is a fading trend.

“There has been a shift of expertise to the supplier,” says Neatby. “It gives the ability to the company to hire more generalists to deal with a number of things. In the past, companies may have had a group of pension experts or benefits experts. Companies [using] technology are able to rely on the supplier for this type of expertise more and rely on their own people less.”

Whether plan sponsors choose to do the administration in-house or choose to outsource, some of the decisions on which tasks to automate are still up to them. “What is manual depends on what the client wants to spend. They might want the interface with the carriers to be automated and the enrollment automated or paper-based,” explains Neatby. “From an efficiency point of view, enrollment is still a big part of [benefits administration], and manual enrollment is more painful than a technology-based one.”

Plan type and organization structure can also play a role in the decision of what to automate. “One plan that best suits itself to technology is the flex plan. The different options and the modelling that people need to do…allows you to try different scenarios, and that is best done through technology,” says Neatby. He adds, “Companies that benefit significantly [from automated administration] are those that have groups in different cities or have had acquisitions.” By automating processes, all the information is stored in a central place, which can help employers more easily track how the plan is functioning among the different locations or workforce groups.

Then and Now

Benefits administration technology has come a long way since it was first introduced and has gained a lot of momentum in recent years. “Five years ago, we didn’t have plan member websites,” says Fedorchuk. “Today, we get more hits to our website than calls to the call centre.”

“The majority of our traditional backoffice functions have been either eliminated or automated—data entry is handled primarily in upstream systems (HR management systems and payroll) and by participants via Web self-service, premium collection is handled via pre-authorized payment, and the notification and action steps required to support work and life events are automated via business process management software,” explains Paul Sywulych, partner and lead solution architect, with Morneau Sobeco. “The key to success has been the willingness of plan sponsors and participants to buy in to this new delivery model. We’ve found that even the traditional ‘paper populations’ are rising to the challenge.”

What were once time-consuming and mundane tasks—for example, salary increases and adding a dependent to health and dental plans—are now much less of a burden. And the improved efficiency benefits employees and employers alike. “Because the administration happens more quickly, we get fewer situations where people are trying to file claims and their eligibility isn’t in the systems yet,” says Wayne Lloyd, assistant vice-president, group benefits product and marketing services, with Manulife Financial. “We get less and less rejections.”

If the plan sponsor chooses, many responsibilities can be taken from the administrator’s to-do list and transferred to the employee. Many insurers and TPAs offer Web access to their systems, and most can be linked directly to an employer’s intranet. With the use of single sign-on technology, employees can seamlessly access their benefits information through an employee portal. They can enrol, update information and find answers to questions that were once typically directed to administrators and HR personnel. Not only does this make the administrator’s job easier, it also eliminates data-entry errors on the supplier side and speeds up the entire process. “Now we are able to do things online and instantly see the results,” says Lloyd. “It allows people to get their job done and not have to follow up to see that the change has been made.”

Technology for benefits administration isn’t only changing how plans are administered; it is also changing how they are designed. When plan sponsors decide what type of benefits they want to offer employees, they also need to consider how the plan’s design will fit into the available technology. “How will this plan be administered with the use of technology? This is something employers need to think about when designing their plans. In the past, it wasn’t as much of an issue,” says Neatby. However, benefits plan design isn’t completely driven by technology. Although it may take a little extra time and cost a little more, customization of plan components is possible.

Furthermore, technology hasn’t completely taken over benefits administration. There is still at least one task that requires manual work. “While many U.S. insurers accept electronic beneficiary designations, the Canadian marketplace has been slow to move from the traditional requirement for an original signature for claims payment, retaining a need for some paper processing to accompany the self-service enrollment process,” explains Sywulych.

The Pros

The pace at which amendments and claims are processed is faster, the information that insurers have is more up to date, the range of services they are able to offer has increased, and the cost of offering these services has decreased. In addition to these advantages, employers are also able to obtain reports and analyses of their benefits programs to help them better manage their business and workforce—information that wouldn’t be as easily available, if at all, without today’s technology.

For example, insurers can give plan sponsors and consultants access to aggregate reports on which drugs are being used— sometimes even broken down to particular workforce groups. This information can give plan sponsors a better idea of overall workforce health and, in some cases, help prevent long-term disability (LTD) claims. Keith Foot, president of Automated Administrative Services, provides an example.

After analyzing the data for a client, Foot’s company found a sharp rise in asthma medication among an employee group that worked with paint. Once this was brought to the employer’s attention, a work-site assessment was done. The assessment found that the ventilation in the employee group’s area was poor, which had led to breathing problems and the increase in asthma medication. “Big-picture analysis can help mitigate LTD claims,” says Foot. “If it wasn’t for automated systems, it would be difficult to do this type of analysis. Educated employers are now asking for this type of information—reports in aggregate.”

Fedorchuk adds, “Prevention is one of the key themes running through the benefits industry. You can manage costs by trying to find a better deal or by trying to download costs—we see that with governments [off-loading services to] the private sector. Employers can always reduce benefits coverage to employees, but a big trend is, Are we using our benefits plan effectively?”

Additionally, the systems that are in place today can prevent time-sensitive tasks from falling by the wayside. “For example, if John Doe is off work and has to wait 100 days before he can receive LTD, at 90 days, employers are automatically notified [by the system] to start getting paperwork ready. In the past, it was often up to the employer to remember to do this. There are many areas like that,” explains Foot. “If the system is robust enough and there are enough checks and balances, you can pretty much catch whatever is necessary.”

The Challenges

With all the advantages that technology brings to benefits administration, there are challenges as well. The privacy and security of data is always a concern when personal information is being transferred electronically. It’s an issue that insurers and other providers take very seriously and have invested heavily in. “Companies [that] are providing these services need to be aware of, and follow, strict security guidelines,” explains Neatby. “Our processes are audited annually to ensure they comply with legislation and the wishes of our clients.” Some people feel that security isn’t more of an issue now than it has been in the past—there is just more awareness of the consequences and the measures needed to prevent possible breaches. “[Security is] more heightened now,” says Lloyd. “It [means] ensuring everything is encrypted as it moves around. I think paper going through the mail has always been problematic, but we were less aware of [the issues] in those days.”

Additionally, since technology quickly goes out of date, insurers and TPAs need to constantly upgrade their systems to stay competitive—which can be costly. Providing clients with the services they want, with sufficient options at affordable costs, can be another hurdle. “The greatest challenge for us has been to strike an effective balance between flexibility and affordability,” says Renée Beaudoin, chief information officer with Morneau Sobeco.

There are also some concerns that automated benefits administration systems reduce the face-to-face interaction between sponsors and plan members. As technology takes over, when someone needs help, he or she is often directed to a call centre. For many callers, the person on the other end can’t replace the service that HR used to provide. Call centre operators understand the benefits plans and are able to answer questions, but what is missing is the personal touch. “People don’t visit their HR person to fill in their benefits forms [anymore],” says Neatby. “People now have to be more self-sufficient—this is where I think our society and our clients are going. But for people who are not so technologically savvy, it’s a bit more difficult.”

Although many providers have call centres and account representatives available to answer questions and concerns from members and sponsors, email and 1-800 numbers often take the place of in-person meetings. In today’s age of cost-cutting and productivityboosting, it seems that the human touch is a trade-off for efficiency.

Future Benefits

As technology continues to evolve, paydirect drug cards are becoming increasingly common. In fact, according to Dan Berty, assistant vice-president, administration and claims, group benefits, with Sun Life Financial, they account for 32% to 35% of Sun Life’s overall drug claim volume. Those in the industry believe that number will increase substantially in the next few years and pay-direct cards will be used commonly for paramedical services. “I would say within the next 12 to 18 months, it will [start to] be an industry standard. I know we are working on it. I can’t imagine that our competitors are standing still on it either,” says Fedorchuk. As with pharmacies, insurers will need to have agreements with each paramedical provider. “[We will] need to build up that base. It’s not just a matter of a provider flipping a switch; you need to have a contract with [each] provider,” he explains.

Berty agrees that the next big advancement in the benefits industry will be using pay-direct drug cards or Web portals for paramedical services, but estimates that these practices will be common within the next five years. “The issue is making it easy for lessorganized provider groups. Pharmacies have a lot of technology by nature. [With] dental offices, there is a legacy there that has been set up. Many of the paramedical providers are relatively small operations,” he explains.

In addition to pay-direct procedures for paramedical services, Foot believes there will be more collaboration between insurers and the medical community. “I think what we will ultimately see is the sharing of information between providers, employees and doctors. Right now, it’s very segmented. Soon, we will see the doctors’ systems going directly to the pharmacy. The electronic exchange of data could mitigate some of the time pharmacists spend confirming prescriptions, dosages, et cetera, with the physician’s office.” He adds that once doctors are able to access insurer systems, if patients need prescriptions and there is an option on the drug formulary, using the patient’s card, the doctor will be able to look up what he or she is covered for.

To encourage the practice of sharing information, Foot’s company is designing a tool that may help. Essentially, it’s a USB key that carries the patient’s medical history—a list of medications the patient is on, PDF copies of X-rays he or she has had, and any tests that were done. If the patient has to see a specialist, or simply goes to a different clinic for his or her next medical appointment, the information goes with the patient in a downloadable format, ready to plug in to the physician’s computer.

“One of the biggest issues we see is the [lack] of sharing of health information,” Foot says. “You can go to the doctor today and the specialist tomorrow, and they could do the same tests, unless [the patient] tells them. If people could carry this information around on a USB key that can be uploaded and kept up to date, at least when you go to a new doctor, you can provide some history.”

In addition to innovation, industry insiders expect some of the current trends to continue and become the norm. “The rising trend in Canadian benefits administration is the demand for a more holistic offering from providers,” says Sywulych. He adds that employers are setting their sights on an expanded suite of services, such as health-risk appraisals and coaching, absence and disability management, and the integration of defined benefit and capital accumulation plan administration services with benefits administration.

The technology and services available today for benefits plan administration were almost impossible five years ago—and unthinkable a decade ago. As employers continue to ask for streamlined, cost-efficient services, we can only expect that providers will deliver with increasingly innovative technological solutions.

April Scott-Clarke is assistant editor of Benefits Canada.

april.scottclarke@rci.rogers.com

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© Copyright 2009 Rogers Publishing Ltd. This article first appeared in the January 2009 edition of BENEFITS CANADA magazine.