Moving employee benefits programs to the Internet gives employers fewer administrative burdens, employees more plan control and carriers another technology initiative in which to pursue.When Santa Clara, Calif.-based Yahoo! Inc. scouted last year for a new group employee benefits program, the Internet portal provider had a two-point wish list. First, the program had to fit the needs of its 1,100 employees. Befitting of a true dot-com company, the second stipulation was that the program had to exclusively reside on the Internet.
Most insurance carriers haven't implemented the technology that's necessary to offer employers Web-based benefits packages. However, Yahoo! executives found a group program offered by Portland, Ore.-based Standard Insurance Co., which last March unveiled AdminEase, an online group life and disability employee benefits program.
"Executives at Yahoo! told us that because they operate as a paperless, desktop-driven culture, they wanted their employee benefits program to be automated too," Mike Skiens, assistant vice president group marketing for Standard Insurance, explains.
Standard Insurance spent most of 1999 developing the system in-house. "Moving employee benefits to the Web allows both us and our employer groups to eliminate many labor-intensive administrative responsibilities that once bogged down our operations," Skiens says. "In our opinion, the three-ring employee benefits binder is a thing of the past."
Transforming business
Web-enabled employee benefits programs-which run the gamut of services that includes health, dental, life, disability and workers' compensation coverage and even 401(k) plans-are transforming the way employers, employees and carriers conduct business.
For corporate benefits managers, using the Web to administer employee benefits programs extricates them from processing enrollment and beneficiary forms, calculating premiums and verifying evidence of insurability.
Internet-based benefits enrollment also empowers employees to essentially become their own plan administrator, which in turn reduces a corporate benefit manager's workload. By connecting to a site that hosts an employee benefits program-often through a corporate intranet-employees can, for example, apply for life insurance coverage, change beneficiaries or apply for additional coverage as life events occur. Often, they can do this beyond the limited window of open enrollment. As a result, this vastly increases a carrier's ability to upsell products and services.
These advantages weren't lost on Yahoo!. Although dot-coms fully appreciate the necessity of Web-based operations, even Standard's brick-and-mortar employer groups have begun to see the benefits of online enrollment. AdminEase currently is being used by 20% of Standard's corporate customers-or about 600 employer groups.
AdminEase is just one of several Web-based models that have manifested themselves so far in 2000. Whether they're developed in-house or outsourced to a third party, the means to the end is the same: Streamline employer efficiencies, provide employees with more hands-on control and furnish them with research and educational tools to make informed decisions about benefits.
The TriZetto Group Inc., a Web-based applications provider to the health care industry, recently aligned with Sierra Health Services Inc., Las Vegas, to launch an Internet portal targeted to small businesses seeking Internet-based group health insurance. The site, www.healthweb.net, was rolled out in April to Sierra's 350,000 HMO and PPO members in Nevada, Arizona, Texas and Colorado. By moving employee benefits to the Web, Sierra expects to streamline its efficiencies by reducing the 1.6 million annual phone calls it receives through its service centers by 20%, states Larry Howard, Sierra's senior vice president of insurance operations.
To streamline efficiencies and latch onto new business often means outsourcing technology to third-party exchange models. Driven by volume, BenefitMall.com, based in Dallas, currently markets and distributes group benefits packages from more than 100 insurance carriers around the U.S., with total premiums of about $400 million.
Charging carriers a commission to sell their packages online, BenefitMall.com targets only small businesses. This appeals to carriers who want to devote their internal administrative resources to serving large companies.
Online trend
Carriers aren't the only companies moving employee benefits programs to the Web. Employee benefits firm Hewitt Associates, Lincolnshire, Ill., launched a separate Internet-based benefits programs July 1 (see article on page 48).
Known as Sageo, the online venture is intended to "create a more efficient market for employer groups than the standard outsourcing model they're accustomed to," says Thomas Beauregard, chief strategist for Sageo.
"Sageo is also intended to assist carriers," he continues. "If a carrier had business with 50 employers groups, that would mean communicating with each one separately. Bringing them together within Sageo eliminates this redundancy. Now it may be 50 employer groups, but it's one communication feed."
Across this spectrum of benefits models, most programs are making a mark for removing the administrative onus from employers and handing employees more control of their benefits-from enrollment to plan upkeep.
"Employers are moving toward a defined contribution plan of benefits, where employees determine how and where to spend their benefit plan dollars," says Donna Otten, director of group life services for Aetna Group Life, Hartford, Conn., which recently launched an online group life program called iChoose.
Customarily complex
Employers spend an average of $5,000 to $6,000 a year per employee on benefits, states James Clarke, president of Irvine, Calif.-based Employee Benefits Services. To mitigate this expense, "it won't be long before employees will have full autonomy in selecting their benefits, with the employer simply writing a check to cover their annual contribution," Otten predicts.
Due to their complex nature, employee benefits typically have been an administrative challenge for most corporate benefits managers. When a new employee starts work at a company, a human resource manager often has to fax or phone in personal data to a carrier enrollment administrator. Or in some cases, it's the employee who does it.
In the past decade, interactive voice response became the preferred technology for handling benefits enrollment. Integrated voice response is a self-service telephone technology that uses a person's voice to activate a series of commands. However, the Web is supplanting IVR as a quicker and more accurate method to navigate through the labyrinth of employee benefits enrollment choices.
Standard Insurance executives are convinced that employer groups will gravitate to the Web in droves over the next few years once they realize the advantages. Hosted on the Web by a Standard's third-party affiliate that Skiens did not name, an employee can access AdminEase by logging onto the company's corporate intranet where a URL links the employee to the AdminEase home page. Under the password-protected system, an employee navigates to a Web page that provides a description of all the individual life and disability policies Standard offers, and the terms of the plan. For example, many employees want to know the out-of-pocket employer contribution to an individual plan.
Educational tools are essential to such a program, primarily because employees usually fail to grasp the dynamics of life and disability coverage and a policy's meaning. As such, a Web page on the AdminEase site enables employees to collect data about products, and use the tools to calculate individual coverage amounts.
"We found that consumers often enter blindly into electing coverage-especially for life insurance-so presenting this data on the Web enables them to capture vital data and then make an informed decision," Skiens says.
Like AdminEase, Aetna's iChoose program is a proprietary plan that's accessible to employers and employees. Although some Web-based benefit enrollment programs are designed exclusively for employer access, programs that promote employee interactivity will have the most appeal, experts concur.
Employee destiny
"Putting the employee in control is paramount," says Dana Stiffler, a research analyst with Meridien Research Inc., Newton, Mass. "The level of involvement can range from more sophisticated tasks, such as tracking a health claim or electing a new coverage. Or, it can be limited to more mundane tasks such as typing in an address change online."
Aetna began building the infrastructure for iChoose, which is being piloted by three large corporations, in late 1999, targeting companies with about 1,000 employees, Otten says. "We had always dealt with the employer exclusively," Otten states. "Rolling out iChoose definitely forced us to become more consumer focused."
When employees enroll with iChoose, they first log onto a corporate intranet and click a "Employee Benefits" hyperlink. This sends them to the Internet through a Web server hosted by Aetna. Validating their identity via a user name and password, employees can access Web pages that provide interactive educational tools that help them select the proper amount of life insurance.
Selecting life coverage isn't easy. Aetna research indicates that most people don't have enough life insurance protection and aren't sure how much they need. Determining the amount is often predicated on more than a multiple of annual salary.
In response, iChoose provides employees with Web-based electronic calculators to determine appropriate coverage amounts based on a formula. This formula takes into account a fixed amount such as salary, and variables such as a new mortgage, birth of a child and college tuition expenses. After about 10 minutes of research, an employee selects a comfortable insurance sum, elects a beneficiary and the policy is completed offline.
One advantage of Web-based benefits programs is that to most consumers, life events are a consistently evolving process. Under many traditional group life policies, changing coverage is limited to open enrollment periods, often a 30- to 60-day window.
With iChoose, employees can request additional coverage at any time. "Something is wrong with the system if a person buys a home in July and must wait until November to add more coverage based on an open enrollment stipulation," Otten says. "iChoose enables consumers to request additional coverage as life events occur. But equally important is that through iChoose, we're trying to instill the notion to the employee that life insurance is something that should be mulled over with greater frequency-more than just every five to 10 years."
Model efficiency
As they consider implementing Web-based employee benefits initiatives, carriers have several options to choose from.
By outsourcing the technology to a third party, carriers have found that they can exponentially increase their exposure by linking with multiple brokers and employer groups in a secure, Web environment. The Prudential Insurance Co. of America, for example, opted to go this direction when it signed a national agreement in June with Greenwich, Conn.-based BenefitPort, to distribute group insurance benefits, including basic term life and disability products on the Web.
Providing employers and employees choice, flexibility and easy access were factors for Prudential to align with BenefitPort, says Anne Bossi, president of Prudential's group insurance unit.
BenefitMall.com, which received $40 million in capital funding from several investors including Morgan Stanley Ventures, has drawn its sights on the small-business market, or companies with 1,000 and fewer employees. "Many carriers would rather pay a third-party exchange a 3% to 5% commission to manage that selling cycle for this small-size market so they can concentrate on the bigger companies," says Mark Davis, vice president of marketing and Web management for BenefitMall.com.
BenefitMall.com also believes it can rope in incremental business through speed of process. "Usually, when an employer meets with a broker to obtain group benefits, the selection process takes a month to 45 days," Davis says. When an employer logs onto BenefitMall.com seeking a group benefits package, Davis says that selecting a program usually takes an employer and broker one day to finalize.
Carriers such as Aetna and Standard, though, recognized greater advantages in launching proprietary systems. Aetna leveraged off its existing competencies to build iChoose. "The out-of-pocket investment we made to launch iChoose was minimized because of the existing in-house IT competencies we already had access to," says Otten, who didn't elaborate on the start-up costs associated with iChoose.
Otten doesn't believe Aetna will be burdened by ongoing labor or overhead costs as iChoose expands. "If an employee has a query about their coverage, they often can answer their own questions quickly on the Web, without having to enlist the help of our call center," Otten states.
Standard Insurance invested $35,000 to construct AdminEase, and incurred ongoing costs that Skiens says are manageable. These include installing a team of IT programmers and hiring one full-time marketing specialist of technology.
Although Web-based employee benefits programs have a huge opportunity in front of them, most companies that are participating believe the programs must have offline support. BenefitMall.com, for example, has built a call center, while Aetna and Standard are incorporating IVR technology in the enrollment and ongoing administration process.
"While we expect the adoption rate on the Web to increase each year, we realize that because some employees don't have access to a PC, we will have to provide a call center and IVR technology to complement the Web program," Otten says.
Employees had to get accustomed to IVRs, and many resisted it, Otten recalls. She believes Web-based employee benefits today is tantamount to that experience "Consumers are becoming more dependent on the Web," Otten states. "There's almost an intolerance when they can't perform tasks online. As a result, I think it's a matter of time before you'll see a mass migration to Web-based employee benefits."
