Most employers focus on the quality of the benefits they provide their employees as well as the costs of those benefits when making benefit decisions. However, there is a third element they should be considering: Benefits Administration. This important service indirectly impacts both the quality of the coverage as well as its overall cost. Employers may purchase what is perceived as the best possible coverage. They may even pay a premium for quality coverage. However, if the administration system is cumbersome, employers may spend an inordinate amount of time managing their benefits package, and consuming valuable HR resources in the process. And if employees aren’t added on a timely basis, claims may be denied or slowed in getting processed, resulting in employee dissatisfaction.

The failure to properly administer benefits is one of the major “hidden costs” of benefits. Studies show that the average employer spends 4% of its premiums on benefits for employees who are not eligible or are no longer employed. Add to that the cost of compliance for mismanagement of benefits and you are looking at a significant impact on an employer’s bottom line. When you purchase a piece of equipment, you look not only at the price to buy it but also the cost of operating it. When we purchased a copier recently, our buying decision was based on the operating cost as well as the quality of the service we would receive. We looked at the “total cost,” not just the purchase price. Why should purchasing benefits be any different?

Many employers are addressing this issue by moving toward automated solutions, i.e., human resource information systems or benefits administration systems, to assist in managing their benefits. While these programs are beneficial and can increase overall efficiencies, they don’t replace HR or the services provided by a quality employee benefits broker. HR still needs time and training to fully utilize these programs. They also need the support of a quality broker that can support the employer’s administrative system, both in terms of the technology they use and the carrier’s systems. Pairing an employer with a carrier whose systems don’t mesh, whether they use paper or technology, is a recipe for disaster.

Employers need to look beyond the salesperson in the selection of their benefits package and evaluate the support that a broker brings to the table from a benefits administration perspective. Broker compensation includes revenue to support the administration as well as the sale of the employee benefit products. Be sure to evaluate both.

Some employers also consider single-source solutions as a way to increase efficiencies. Tread carefully here. What does your payroll company know about benefits? What does your benefits provider know about payroll? Many single-source solutions are not truly provided by a single source, but instead by multiple providers under a common label. If you have to call different departments for payroll and benefits, is it really any different that calling different vendors.

The key to making the right decision is not to buy the shiny new system or move to the newest trend in the marketplace; it is to evaluate your needs and develop a strategy that works for you and your employees — and to make sure that you partner with brokers who bring true, value-added service to you and your team. Utilized properly, they can assist you in maximizing the value from your benefit decisions.

If you’re interested in learning more about this topic, or the services we provide, contact Erick here or email us at