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Vendor Administration Approaches Have Advantages, Disadvantages

January 9, 2009
Related Topics: Benefit Design and Communication, Health and Wellness, Compensation
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There are two approaches employers can take when they integrate disability and health management: use one vendor to administer all of their programs or use multiple vendors for specific services.

    Several health insurers recently launched integrated offerings, often partnering with other vendors, to give employers a single-source solution.

    Such an approach can be more cost-effective and seamless, experts say, but a single vendor may not excel in each of the various programs.

    As such, some employers favor a "best in class" vendor approach, experts say. While such an approach is appealing, it can be more cumbersome as employers are responsible for making sure each vendor is willing to work with other vendors and share data to have a truly integrated program, experts say.

    Vendor selection generally depends on the size of the employer, says George Faulkner, a principal specializing in absence management for Mercer in Princeton, New Jersey. "Smaller employers are more interested in the administrative ease and are more likely to go with a single vendor, whereas larger employers tend to want best in class and may have more clout with vendors to tell them to cooperate and work with each other," he says.

    "We still see a lot of interest in best-in-class purchasing strategy," says Dr. Miles Snowden, executive vice president, clinical strategy, at UnitedHealth Group Inc. in Atlanta. Part of the reason few employees are using a single-source provider is that the decision has to come from two different sources: human resources, which oversees health care, and disability, which tends to be overseen by finance, he says. A vendor has to sell to two different parties at the same time in order to get uptake on this product, he says.

    While Aetna Inc. will work with other providers on request, "the beauty of having several programs with Aetna is that we have a shared platform—a common clinical system that the clinicians in disability and clinicians in medial use," says Adele Spallone, head of clinical services for disability and absence management at Aetna in Plantation, Florida.

    That shared platform allows clinicians to see medical information, lab results and pharmaceutical records in real time and provide integrated reports for employers," which we would not be able to do if it was through an external vendor," Spallone says. Those outside vendors must be willing to release information and share data, which she says is a lot more challenging.

    Experts pointed out that while a single-source vendor can provide integrated data, employers utilizing multiple vendors often engage outside data warehouse firms such as Ingenix Inc., a data warehouse owned by UnitedHealth, and Medstat, a unit of Thomson Reuters.

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