Want to improve administration of your clients’ benefit plans?
Here’s a suggestion: Help them pick administrators who agree to meet performance standards and offer financial guarantees.
That might sound like revolutionary advice, but demands for standards and guarantees are typical negotiating points in most markets.
Performance standards and guarantees address employers’ needs to simplify the benefits administration process and reduce unexpected costs while consistently managing compliance requirements. Adherence to performance guarantees may also increase employees’ satisfaction with their benefit.
Think, for example, about employees who are using flexible spending accounts to pay for health care or child care. They need prompt reimbursement of the monies already deducted from their checking accounts.
Using performance guarantees can also help the employer’s benefits personnel focus on achieving current business objectives rather than complying with COBRA, HIPAA, the flexible spending account rules and all of those other complicated, rapidly changing regulatory schemes.
Finally, effective performance guarantees can cut costs related to violations of federal benefits laws. Penalties for failures to comply with COBRA, the law that governs continuation health benefits for departing employees, can run as high as $500,000, or 10% of group health plan costs.
Fines for failing to comply with the FSA rules and the health reimbursement arrangement rules are lower, but there are still potential land mines. Simply misplacing documentation for some FSA claims could put an employer at risk if government agents come asking about those FSA claims.
Of course, finding a plan administrator whose guarantees mean something is easier said than done. Here are some questions to consider.
1. What kinds of performance guarantees are offered?
Performance guarantees can cover a wide spectrum of services. But at the very minimum, they should include specific measures regarding performance measures such as the administrators average speed to answer calls, call abandonment rates and claims payment accuracy.
2. What technology supports the established performance standards?
Employers should select a benefits administrator that provides 24-hour Web access to real-time account management tools, flexible electronic interface capabilities, and toll-free telephone access with voice response and tracking histories. Detailed documentation is crucial to employers, as the burden of proof, particularly with COBRA continuation benefits and HIPAA privacy rules, lies with them.
3. How often will the administrator report results?
Employers should look for benefits administrators who have tracking and reporting systems that monitor and measure results against the established goals, and who can set benchmarks against which they can measure continuous quality improvement. Reports on key measurements should be reported at least quarterly and more often if the employer requests it.
4. What happens if standards aren’t met?
Should services not be performed in a manner that meets the agreed upon guarantee, employers should expect financial compensation which includes contractual indemnification from compliance fines, penalties and excise taxes. For example, administrators should be willing to put their fees (e.g., up to 10%) at risk. That shows that the administrators have confidence in their technology, people and experience and are willing to put their money behind their message.
is a vice president at CONEXIS, Orange, Calif., a Word & Brown company that administers many different types of benefit plans, including COBRA plans and flexible spending accounts. She can be reached at email@example.com.
Reproduced from National Underwriter Edition, October 14, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.