PSNC 2013: Time for a Change

July 18, 2013 (PLANSPONSOR.com) – How do plan sponsors know when it is time for a change in plan providers?

Speaking during a panel at the PLANSPONSOR National Conference, Anthony D. Agbay, senior vice president of Investments at The Agbay Group, said it is good practice to benchmark plans every three years in addition to benchmarking providers by issuing a request for information (RFI) or request for proposals (RFP). “It will either validate your decision to keep a provider, or show a reason to change,” he told attendees. According to Agbay, plan sponsors need to know what else is out there, and whether another provider can meet their plans’ needs better. “Is another provider a better match for business and participant type or plan size?” he queried.

Michael W. Kozemchak, managing director at Institutional Investment Consulting and moderator of the panel, said the panel identified poor data, inaccurate processing of transactions, inaccurate information from the call center, testing issues, late Form 5500 filings, not getting a real person, antiquated systems and time of response, and people problems as common complaints leading plan sponsors to change providers. Shelley Weiner, VP, regional director of Institutional Markets at Transamerica Retirement Solutions, added plan document issues to the list; the provider’s plan document may not fit the plan’s processing needs. From the investment side, Agbay said, often plan sponsors are concerned with inflexibility in proprietary funds and inability to offer custom target-date funds (TDFs).

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According to Weiner, plan pricing is a mostly fixable problem; providers want to keep the business, so plan sponsors have some leverage to negotiate. In addition, relationship issues are fixable; she suggested plan sponsors ask if they can meet other team members at the provider and find a better fit. Agbay added that issues such as consistent call center problems are usually not fixable.

Before making a move to change providers, though, Stephen Popper, managing director at Sage View Advisory Group, suggested plan sponsors look at themselves to see if they can do better. "Is data integrity your fault; is payroll done well?" he queried. One of the things plan sponsors struggle with is who owns what, and whether they or their payroll teams are responsible for the failure, Popper said. He reminded plan sponsors that they own their plan and should feel comfortable making decisions about whether a service provider is meeting their needs. "There needs to be a justification for all role players supporting a retirement plan; what is their value add?"

If a plan sponsor decides to stay with a current provider, a targeted renegotiation is in order, according to Popper. He warned that the relationship manager is not the best person with whom to negotiate pricing. Plan sponsors should leverage the provider's sales approach. Kozemchak said: "If you ask for a new sales person to renegotiate, and they don't give you one, take it as a no bid and tell them you plan to move on. Of course, the provider will come back and say they will do it."

If a plan sponsor decides to change providers, it can expect the conversion to take 12 weeks, according to Weiner. "Two things that can tie up a conversion are not having the fund lineup finalized early on, and the person who is authorized to sign documents not being around," she said. "Have a couple or three people who are authorized to sign off on things," she recommended.

HDHP Linked with HSA Reduces Employer Spending

July 18, 2013 (PLANSPONSOR.com) – A study by the Employee Benefit Research Institute (EBRI) found a high-deductible health plan (HDHP) linked with a health savings account (HSA) reduced health care spending for employers.

The multi-year study looked at a large Midwestern employer that adopted an HDHP with an HSA for all its employees in place of its traditional health care offering. This architecture resulted in a reduction of 25% in health care spending for the plan during the first year, or $527 per person in the aggregate.

“Results showed that spending was reduced significantly in the inaugural year of the HSA plan in medical, pharmacy and total claims categories,” said Paul Fronstin, director of EBRI’s Health Education and Research program and co-author of the study. “Results also showed the cost savings continued over the succeeding three years, albeit at a slower pace.”

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Findings from the study also included:

  • Each category of health spending experienced reductions in the first year of the HSA plan with the exception of spending on in-patient hospital stays. Spending on laboratory services and prescription drugs had the largest declines at 36% and 32%, respectively;
  • Only pharmacy and laboratory spending were lower throughout the entire four years after the HSA plan was adopted; and
  • Reductions in pharmacy spending were large and mostly sustained over the four years after the HSA was adopted. In the first year of the HSA, pharmacy spending reductions were 40% to 47% for individuals in all but the highest quintile of spending.

The full results of this study can be found online at www.ebri.org in the July issue of EBRI Issue Brief under the title “Health Care Spending After Adopting a Full-Replacement, High-Deductible Health Plan with a Health Savings Account: A Five-Year Study.”

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