A How To for Online-Benefits Management

Some help in deciding whether to do online enrollment - as well as how to do it, when to do it, and why to do it.

November 2, 2001
Savvy companies are increasingly conducting their benefits enrollment electronically. By one estimate, 80% of organizations with over 1,000 employees will have some form of online enrollment by 2003. In preparing your organization for online enrollment, you will need to evaluate various Web options and then take the steps needed to achieve an efficient, effective enrollment process. This is true whether you are just adopting Web enrollment or upgrading a system that is currently in place.

A critical starting point for your evaluation is often overlooked -- "know thyself." Mapping out in writing the answers to some basic questions about your organization and about the goals of the change will help assure that no important information is left out of the decision-making process. Although that may take a little extra time up front, it usually pays big dividends later.

When you examine the issues involved in the online enrollment decision, it may be helpful to think of yourself as kind of a detective systematically answering the questions "who, what, why, where, when, and how." Some considerations might include:

Why online enrollment?
Why are you considering moving to online enrollment or modifying an online enrollment program already in use? Is the effort part of an overall human resources information technology strategy to increase employee self service, or is it a stand-alone project? Who are the sponsors for the project within the organization, and who will "own" the application once it is completed (IT, HR, Communications, etc.)? Specific goals may include:

  • Reducing costs via:

    • Elimination or reduction of paper enrollment materials (enrollment forms, benefit handbooks, provider directories, and so on) and of postage.

    • Reducing the need to hire staff to conduct open enrollment sessions.

    • Reducing the need for customer service representatives.

  • Increasing employee satisfaction by providing:

    • More timely and frequently updated information (e.g., online provider directories, countdown to annual enrollment close date, etc.).

    • Access to more and richer information than can be included in enrollment packets or through interactive voice response prompts. Examples include Web-site help text, Web pages providing up-to-date customized summaries of employee benefit data, FAQs on common benefits questions, access to complete information regarding less-common benefits, and interactive decision-support tools around plan or provider selection.

    • More choices for enrollment (Web, voice response, paper).

    • Reducing the need for new hires to visit a central HR location -- which is especially useful for geographically dispersed organizations.

What do you need the system to do?

  • What types of online enrollment system are to be investigated, and what are the technical and functional specifications?

  • Does the application only need to collect data, or should it be able to integrate employee communications and decision support tools?

  • Does the system stand alone, or does it need to be integrated or interfaced with your HRMS, intranet, ERP, or other system?

  • Does the company need voice response (IVR/VRS) and paper enrollment options handled concurrently? What about call center functionality?

Where will this system be?

  • Where will the application be hosted and where will it be delivered?

  • Can your IT function support this application on internal servers, or will IT's needs be better met by having the application accessed through the Web in an ASP (application service provider) model?

  • Will a solution delivered only within the company environment suffice, or is home access to allow family member participation a requirement?

When will this be done?

  • When does the solution need to be in place? Implementing online benefits enrollment is typically complex and time-consuming; in other words, rapidly implementing a solution for the upcoming benefits year can be a risky proposition.

  • Will you be satisfied with a system just for annual enrollment, or does the value proposition require the solution to be in place for new hires and for status changes year-round?

Who'll do it?

  • Who is going to build/maintain the system and who/what else is affected by the project? This is the classic "build vs. buy" decision. Do you have the technical resources and capabilities to build a system in-house? Is this the best use of company resources and is it something your organization will be committed to on an ongoing basis (maintaining and upgrading)? Or do you want to purchase either an off-the-shelf system or have one built to specifications?

  • How does the proposed online enrollment capability relate to your existing vendors, systems, and processes (i.e., will it supplement or replace an existing flexible-benefits administration vendor or paper-based-enrollment services vendor)?

How much money?

  • How much capital is allocated for achieving the company's objectives? This should include not only the cost of the solution, but also any implementation, systems integration, and consulting fees, as well as training and promotional communications.

  • How strong a business case do you need to build for senior management in order to ensure that the project moves forward?

The lay of the land
Navigating through the maze of options involved in pre-qualifying, selecting, or validating an online enrollment vendor can quickly move beyond the scope of a single application. Often, this is an ideal time to revisit the company's entire digital HR strategy.

Listing existing applications, their status in their expected life cycle, and when new applications are slated to be investigated are simple yet valuable first steps to take in determining how to facilitate integration with your new Web enrollment functionality. Top-level categories could include HRMS/ERP solutions (Human Resources Information System/Enterprise Resource Planning software), HR intranet, HR portal, employee self-service functionality, and internal HR application functions (compensation, performance management, recruiting, training, etc.).

The next step is to evaluate your options in the online-enrollment arena. Regardless of the status of other HR systems, your new online enrollment functionality will most likely fall into one or more of the following five categories: Employer Built, Custom Built, HRMS/ERP Integrated Module, Stand-Alone ASP Solution, and Integrated ASP Solution.

The Online Benefits Enrollment Spectrum

HR function works with IT department to create online enrollment application
Typically housed on company servers

HR function hires external help to develop and possibly manage application
Typically housed on company servers

HRIS/ERP Integrated Module
Upgrade current or buy new HRIS/ERP system that integrates online enrollment functionality
Typically housed on company servers, but can be ASP

Stand-Alone ASP
Hire vendor to deliver online enrollment solution over Web, and interface with existing systems and processes
Housed on vendor servers and delivered over the Web

Integrated ASP
Hire vendor to deliver broad online HR solution that includes online enrollment as one of many components
Housed on vendor servers and delivered over the Web

The employer-built option
Also called "home grown," this choice requires your IT staff to program the necessary interfaces, data collection, validation, and other systems needed to accommodate online enrollment. If HR can work in harmony with the IT department, this may be the most cost-effective way to start online benefits enrollment because the need for a large capital outlay is reduced.

Employer-built systems range widely in their functionality, effectiveness, and usability. A talented IT staff with extensive experience building sophisticated Web-based applications can generally do a passable job of creating a stand-alone enrollment application. However, one should beware of software developers who lack experience in building complex, data-driven Web applications.

Even experienced IT staff can stumble when graded on integration with other HR applications, usability, maintainability, and the ability to add more robust functionality (decision support, life event changes, etc.).

Reality Check
Organizations usually underestimate the investment and resources necessary to build a credible enrollment system. For example, a high-tech firm with 5,000 employees spent $250,000 creating a system for the 1/1/2001 enrollment, only to move to outsourced enrollment and benefits administration the following year. The in-house online enrollment system could not yet handle ongoing life event changes or new hires, although the company was planning to build that functionality in the future.

The custom-built option
This involves an application built by a third party that is customized to address particular needs of your company. The big management-consulting firms, as well as many Web-consulting companies, do this sort of thing.

These firms may maintain and upgrade your application, or they may turn over the finished product to your IT staff. Typically, custom building is a costly option, somewhat akin to having a car built from scratch rather than driving one off the lot. Back in the days when there were only a few firms offering enrollment solutions, this option was more prevalent.

Now, fewer companies have the unique requirements that would drive them to look to this option as a solution. Still, the value-added framework surrounding an online enrollment solution such as rich interfaces, branded tools, and meaningful communications may require some customization of solutions.

HRMS/ERP Integrated Module
Many HRMS and ERP systems are selling add-on online enrollment functionality for their products. These solutions are typically priced separately from the other core software functionality, and often online enrollment is bundled with other Web self-service capabilities, such as address changes. PeopleSoft, for example, is adding online enrollment through an eBenefits module that can be used with version 8.0 of their core software.

Another popular vendor is also offering a separate employee self-service module, but one large communications company (14,000 employees) decided in early 2001 not to implement this solution because of a high per employee per year recurring cost. Also, many of these solutions are moving towards providing a fully Web-based version and/or have ASP hosting services for their software.

Companies sometimes feel so tied to their installed vendor that looking beyond its capabilities and promises for the best solution can seem daunting. In many cases, using the current vendors' pre-integrated components in conjunction with a system that already houses company data may not actually be a bad choice. However, this route may also lead to a system with much more limited usability and functionality. Online benefits enrollment is often just a sideline, at best, for HRMS and ERP vendors, and they typically will not have invested the time or effort required to build out an easy-to-use application.

In other words, the application could be functional, but generic. To more fully leverage the enrollment application, organizations often have to add communications and other integrated functionality.

Stand-alone ASP solution
The enrollment area with the most activity, and perhaps the most difficult to work with, is the stand-alone application service provider solution space. The defining aspect of these solutions is that they center around providing Web-centric online enrollment/benefits administration capabilities, rather than a broader set of HR services through installed software. The marketplace is bundling together more and more services and functionality, making it hard to find a solution that just offers online benefits enrollment services alone.

AtWork, for example, has a standard rate for its suite of services at $4 to $6 per employee per month for a 1,000-employee company. In general, smaller employers pay between $1 and $9 per employee per month for online enrollment solutions. These are often bundled with several other benefit administration-related services.

Larger employers have more flexibility to buy unbundled services and can sometimes pay less than $0.50/employee/month for basic services. This is a rapidly maturing market -- many of these firms are trying to recoup substantial system development costs. Over time, competition may drive these fees down, so you should compare fees carefully.

Selecting a vendor can be a daunting task, with the range of services and capabilities varying widely.

A quick phone survey of five major ASP benefits enrollment providers in March 2001 found that the cost of a two-year contract for 20,000 employees ranged from $150,000 per year to $300,000 per year, with one outlier at $750,000. A 1,000-employee organization, depending on the quality and complexity of the solution, could put a system in place for anywhere from $20,000 to $100,000 plus.

Integrated ASP solution
Broader Web solutions that encompass more of the HR spectrum, but also include online enrollment, can be designated as integrated solutions. These products may have much of the functionality of an HRMS or ERP system, or they might provide other integrated point solutions such as work-life benefits, performance management, salary administration/modeling, or training and development applications.

Without a clear sense of the scope of services to be provided, pricing these solutions tends to be more difficult. Often, services can't be unbundled, even for large companies, and there can be serious data issues that must be taken into account when installing applications that span many HR activities.

Putting it all together
The solution categories, vendors, and capabilities laid out above are fluid. Business models, products, and, pricing all can change overnight -- not to mention the actual existence of some vendors.

Coordination and integration with existing enrollment capabilities is another key to success, but it can greatly increase the complexity of the project. Some areas for consideration include:

  • Integration with existing vendors, systems, and processes: Your company may have existing vendors and/or systems that work well, but are not Web-based. Should you completely replace all existing capabilities, attempt to directly extend those capabilities into the e-commerce environment, or create or hire new capabilities to mesh with the old capabilities?

    Recall that the existing vendors and/or systems may be sending eligibility, premium, and other related data to a variety of other organizations (e.g., health insurance carriers and other non-health carriers), so total replacement implies replacing all of those data links, as well. In the end, this decision may depend on how well the existing capabilities work. In other words, "know thyself."

  • Data management: A strategy for synchronizing existing databases with the new Web-based system often must be created. If a system is being totally replaced, then a strategy for converting data from the incumbent systems must be created.

  • Education and outreach: Providing a Web-based enrollment capability does not guarantee that employees will either use it or use it properly. Employees need to be told about the site's existence, and educated about using it. Also, since paper-based enrollment frequently cannot be totally eliminated, realizing savings from paper reductions may require a concerted communications strategy to promote the use of on-line enrollment and to achieve employee buy-in to reduce paper-based communications.

    You may have concerns about the acceptance of a new online-enrollment application, especially if a segment of your workforce doesn't have Web access at work or is not technology savvy. However, many organizations have found ways to reduce or eliminate this perceived obstacle. One 5,000-employee company rolled out online enrollment for the first time on 1/1/2001, and it was able to garner virtually complete Web use through careful investments and communication. In this case, there were a number of manufacturing facilities where employees had no Web access on-site, and at these locations Web kiosks were installed.

    Another major tactic involved not providing voice response enrollment, forcing employees to choose between the Web and making a specific request for paper enrollment material by mail. The initiative was supplemented by aggressive communications directing employees to alternate avenues for accessing the Web (kiosks, home computers, managers, libraries, etc.).

These issues can be pursued in the context of an HR/IT strategy and/or as part of your system selection process. Whatever online enrollment solution you decided is right for your organization, be certain you create or have the vendor provide an implementation and ongoing project task list. The task list should clearly indicate responsibilities, timing, and allocated resources for each part of the project.

Finally, while being mindful of your timetable, try to expand the scope of thought from a single application or functionality to a broader benefits and human resources technology strategy. This will help position you to move forward quickly when the next opportunity arises to improve HR operations through technology.