ADP Advisor^®

New ADP^® advisory service aims to help clients achieve a lower-cost, higher-value benefits mix

Companies often do themselves a disservice when they rely exclusively ondecision support tools to determine their benefits mix. How so? "They start with basic assumptions regarding the levels of coverage employees prefer," explains David Marini, Vice President & Managing Director of ADP's new Strategic Advisory Services. "But they overlook the extent to which communication and education could influence those preferences. As a result, they wind up choosing needlessly costly levels of coverage."

ADP's new advisory group was formed to guide large employers (1,000 employees or more) in creating a more cost-effective benefits mix, with potential savings in the millions of dollars.

Key source of savings: educating employees on the
benefits of high-deductible health plans
A key source of savings, according to Mr. Marini, lies in educating employees on the advantages of high-deductible health plans. "Most of them are healthy and don't go to the doctor much," he explains. "Yet they choose expensive health plans that cover 90% of every visit."

Mr. Marini notes that employees typically pay $400 a month for such coverage. "Switching to a high-deductible plan could save them $250 a month, which they could deposit into a Health Savings Account," he says. Employees who stayed healthy could accumulate $3,000 a year in tax-advantaged savings, while the employer could save $1,500 a year — per employee — on health insurance. "If you have 1,000 employees and migrate 30% of them to highdeductible plans, that adds up to $450,000," Mr. Marini notes.

As employees gain a financial stake in staying healthy, they become more willing to participate in wellness programs (weight loss, smoking cessation). This helps create a healthier, more productive workforce, according to Mr. Marini.

Analysis of plan usage and total cost of ownership
As a client of ADP's Strategic Advisory Services, an employer can use internal resources to implement the resulting communication and education recommendations, or ADP can help implement them.

ADP can also perform an in-depth analysis of a company's plan usage, identifying participation patterns among various age and salary groups. This helps employers refine their plan design and target communications more effectively. Finally, The Hidden Reality of Payroll & HR Administration Costs published in 2011 by PricewaterhouseCoopers (PwC) found that organizations frequently overlook the "hidden costs" of in-house workforce administration, time and attendance management, and health and welfare benefits administration. These associated costs account for more than 50% of the total cost of administering these functions. ADP's Strategic Advisory Services can help employers identify these hidden costs and determine where it would and would not pay to outsource a function.

The ADP Strategic Advisory Services Group provides industry expertise and guidance on best practices and cost-effective benefits management. For more information, SASinfo@adp.com.