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Complexity prompts employers to stop self-administration
As more employers outsource their benefits administration, the software vendors that had been selling them self-administration software products are shifting their focus away from employers toward thirdparty administrators, brokers and benefits outsourcing service providers.
In some cases, the software vendors themselves are becoming benefits outsourcing service providers in recognition that the universe of employers that are likely to buy their products is shrinking.
The emergence of business process outsourcing, or BPO, which consolidates benefits administration with that of other human resource and information technology functions, also is eroding the employee benefits information systems marketplace, benefits technology experts say.
Because of the increasing complexity and stepped-up government regulation of employee benefits programs, though, the need for more sophisticated software programs is far from diminished, they point out. As a result, software makers are continually upgrading their products, whether they are being sold directly to employers or to third-party service providers.
"This market is definitely evolving," said William Smith, vp-sales and marketing at Benefit Software Inc. in Santa Barbara, Calif., which has about 1,000 employer clients licensing its software products and is developing a professional version of its software to sell to TPAs and brokers.
Outsourcing trend
"As more employers look at BPO and they look to get rid of their entire IT departments, accounts payable and receivable, lots of times, HR and benefits just goes with them," said Cathy Tripp, national practice leader for health and welfare technology at Watson Wyatt Worldwide in Minneapolis.
In addition, many small and midsize employers are relying on benefit plan vendors or their brokers to provide benefits administration services because of the high cost of purchasing and maintaining sophisticated benefits administration software, she said.
"The employers don't have the budgetary ability to use our systems," said Jason Lee, director of sales and marketing at DataPath Inc., a benefits administration software vendor in Little Rock, Ark., that sells primarily to TPAs but has "a few" direct employer clients.
With a few exceptions, "the outsourcing trend is shrinking the demand by individual employers for EBIS," said Michael Eck, vp in administration and technology consulting practice at The Segal Co. in New York. Mr. Eck said that while many multiemployer benefit plans continue to be...