A Must-Do Move: Vendor Consolidation
A recent Aon survey showed that an overwhelming number of employers — three-quarters — are seeking to reduce redundancies and improve engagement by rethinking their vendor approach. And more than half of employers reported having an interest in vendor consolidation for improved control and oversight and reduced administrative burdens.
Employers are addressing those challenges while asking critical questions about their benefits programs: How can they maximize the value of the voluntary benefits they’re providing to employees? How can they strengthen their programs for better outcomes — for both the organization and employees? A vendor consolidation strategy can help answer these questions.
For the employer, vendor consolidation offers a chance to more deeply engage in relationships that have long-term strategic value, rather than managing multiple vendors in a tactical way. And there are also employer savings when an employer introduces voluntary benefits from a carrier it is already working with, particularly discounts and bundling, as well as the cost savings of administrative time.
There are also benefits for the employees. The claimant experience is often far better when employers choose the right carriers. Some carriers offer a superior level of service and intuitive claim models — including some level of cross-claim checks to ensure employees get the benefits they’re eligible for. And when voluntary benefits are consolidated with one vendor, employees can often reduce the paperwork and information they have to provide — and sometimes even eliminate it — because the carrier already has it. This can also lead to auto-adjudication or even automated settlements, making the employee experience far smoother.
Below are five best practices for vendor consolidation that can lead to tangible results, including dollars back for the employer.
1. Conduct a vendor audit
The first thing employers should do, with the help of their brokers, is audit their current relationships, doing a comprehensive inventory of all relationships and vendors and the satisfaction levels with each one. Vendor satisfaction is critical, especially because the value of a long-term relationship will serve employers not only in pricing conversations but also in strategic partnerships that help maximize the value of what they’re paying. Strong vendor relationships can set up a good foundation for long-term discussions of employee and claimant experience, as well as continually achieve economies of scale in education, engagement, enrollment and administration.
Part of the audit should entail which vendors meet expectations across products. Voluntary benefits should be held to the same standards as major benefits, ensuring they’re connected, valuable and paying the claims carriers say they do. Claims reporting that provides insight and transparency into evaluation process and metrics tracked, along with ongoing tracking of key performance indicators, is fast becoming table stakes. During the audit, employers should focus on carriers that are already on the path of transparency and ongoing reporting.
2. Sequence benefits strategically
Vendor consolidation should be reflected in the enrollment process — specifically, creating a logical sequence and flow, so related benefits are connected. There should be a clear and connected hierarchy. Employees will focus first on major medical, because that’s the largest share of the spend; immediately after, they should see the option to enroll in voluntary benefits that help them with out-of-pocket costs. This sequencing aids in employees’ education and decision making and helps them understand how their benefits fit together.
3. Determine how data flows among partners
During the audit, employers should ask about enrollment platforms and whether carriers already have an established relationship with the platforms. An established partnership would bring an existing pipeline of data exchange, including quality assurance — which helps reduce concerns about the type, quality and amount of data flowing among partners. The other key benefit for an employer is that there should be reduced or no implementation charge to add a product to the system with an existing partnership.
4. Measure satisfaction
Employers should also measure employee satisfaction in a quantitative way to help determine the best vendor consolidation moves. Survey technology can help do so and analyze data over time. There are several items to track that can assist at each stage of the process:
- How knowledgeable employees are about benefits at both the beginning and the end of the process, to determine how effective the education and process are.
- How confident employees are in what they know and the value of their benefits, especially after not reviewing them for a year.
- How satisfied employees are with their benefits, and any quantitative data associated with their satisfaction that can help employers make more data-driven decisions.
5. Ask the right questions of vendors
One of the main reasons vendor consolidation suits voluntary benefits is because of the claim experience. Employers should ask how easy it is for employees to get their benefits paid when they need them most. It’s important to work with your broker to set benchmarks for vendors and ask the right questions, such as what their online claims process looks like, and what data they can provide regarding claims satisfaction.
Employers should define a set of must-haves about what they need their carrier partners to deliver. Those can vary depending on the priorities of the employer and its approach to employee experience, but they can be in designated categories — such as platforms and partnerships, data and application programming interface (API) connections, employee satisfaction levels, and the claims process and payouts.
Vendor consolidation offers significant savings potential and helps employers enhance their benefits packages without incremental costs. When done right, it’s a win-win for both employers and employees.