Retirement/Benefits Markets Suffering From Lack Of "Perfect Service"

There have been a number of articles in Plansponsor.com recently with implications about competitive positioning in the Retirement/Benefits marketspace. In each, I believe there are indications of a lack of overall servicing as well as opportunities to step up and dominate the space. To see these and other articles about the benefits market, link to http://www.plansponsor.com/.

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From Plansponsor.com on May 8: Interest in Integrated Service (TRO, TBO)Running Out of Steam
While cost savings and efficiency remain the most important reasons sponsors give for bundling (DC and DB plans) in 2008 (mentioned as the most important reason for bundling by 39% and 17% of sponsors, respectively), other key reasons vary by a plan’s bundled status. For example, fully bundled plans place great value on having a single point of contact, while semi-bundled plans place much greater emphasis on the opportunity to improve participant services, according to the report.

As a group, bundled plan sponsors question the ability of providers to deliver a consistent service experience across the bundled offering. Consider that bundled plan sponsors report considerably lower satisfaction levels with their DB providers in 2008 (63% vs. 77% in 2005), but higher satisfaction levels with their DC providers (85% vs. 77% in 2005). Intermediaries echo these sentiments, as only 13% believe that service quality is consistent across components of a bundled package.

From Pionline.com on May 12: Fewer DB execs looking to bundled providers
Fewer defined benefit plan sponsors are looking to outsource some or all of their plans to bundled service providers, according to a Chatham Partners survey.

My View:
This is a classic case of a failed value proposition due to a lack of execution. For years, there has been the promise of integrating retirement plans (DB and DC into TRO), then integrating all benefits (TBO), and then all Human Resource functions (HRO), and then all business service functions (BPO).

There is no question that companies want the simplicity and efficiency of a single-destination service provider. However, as these integrated solutions were sold, the services providers simply did not deliver an adequate product. The result is a blot on the entire concept.

The Opportunity:
Service providers that can fulfill the broken promise of excellent integrated servicing to companies and their employees stand to take significant share of the marketplace. I firmly believe that had companies focused their delivery on employee satisfaction, with the full commitment of a "Perfect Service" infrastructure, benefits integration would be the norm and those firms would be dominating the space.

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From PlanSponsor.com on May 12: Economic Crisis Accelerates Move To Consumer-Driven Health Plans
A recent study conducted by Workscape, Inc. and the Human Capital Institute (HCI) indicates that in the midst of the economic crisis...some employers are taking measures to mitigate increasing health care costs. Forty-four percent (44%) said they offer at least one high-deductible healthcare plan or consumer-driven healthcare plan (CDHP) to their employees.

My View:
The shift toward a consumer-driven healthcare plan model is inevitable (unless President Obama steps in with a massive overhaul). Shifting more of the "choice" burden to the employee, however, requires education, communication, and counseling/advising services that are just not there. Without access to vital information, employees will be unable to make critical choices that protect their health and wealth in the short-term and in particular the long-term. We have seen this pattern in the 401k plan where financial education and advisory/counseling services have evolved to meet the need...over 20 years!

The Opportunity:
Retirement and benefits companies can carve out an important niche by focusing on the needs of the employee of companies with HSAs and CDHPs. By servicing these employees in an extraordinary way, service providers will enable their company customers to responsibily achieve the utilization and then the savings these plans offer. Opportunity is there for the taking.

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From PlanSponsor.com on May 12: Employees Need More Health Plan Information/Services
The 2009 UBA Employer Benefit Perspectives Survey found 81% of employers felt their employees were aware of health cost crisis and emerging trends. The survey also found 77% of employers strongly agree that employees need tools to help them choose the most appropriate plan option for them. Nearly 74% felt that the employer should provide education on health care costs and ways to manage those costs, including 68% who say employees should be given hospital/physician cost and quality info.

My View:
Employers are spelling out the types of service that will make their health plans successful. Not surprising, the views are about the services surrounding the plans, not the plans themselves. As above, the trends toward consumer decision-making is clear, but the information/tools are not available.

The Opportunity:
Understanding the client service need, and then filling it completely, is a way to effectively compete. There are those competitors who will design the plans with the best features, coverages, options; there are competitors who will compete with the lowest prices. I firmly believe there is ample room for a benefits provider to compete with services targeting employees who need help planning for and using their benefits optimally.

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These examples show that companies that deliver extraordinary service, and develop a system that focuses on improvement of that service, can fill market holes. I believe it only takes a commitment and then a full-body resolve to develop this competitive advantage. And there is lucrative marketshare to be taken.