HighRoads, a benefit-plan procurement company, touts competitive bidding as a way to offset the rapidly rising costs of health care and benefits. They recently conducted a study using its own database, which includes 4,700 benefit plans at 137 large companies. The study found that overall health and benefit spending by companies in the database dropped significantly when aggressive competitive bidding was instituted instead of plan renewal. The savings ranged from 16 – 18 percent. 

 

One reason many companies just renew their current plans is a concern that existing levels of coverage and options are hard to replicate by starting over with a new vendor. Companies spend an inordinate amount of time crafting plans that meet their needs. Changing vendors midstream can be perceived as disruptive to their overall strategy. However, the HighRoads study found those worries to be unfounded. Companies were, in fact, able to maintain their preferred coverage levels and options in the bidding process. For example, deductibles for covered workers were unchanged after plans were put out to bid. The study concluded that with proper planning and information, benefits specialists in corporate HR departments were able to receive the level of plans they sought.

 

Although companies can save money, caution is needed about how often they put various plan benefits out to bid. Employers should not put every plan out to bid every year, since most plans work best when allowed to run for a few years. Also, some companies do not have the resources to handle a large number of bids. 

 

Human Resources departments have a very difficult job. Their task is to prevent any disruption in service and coverage and to be sure their workers are happy. By bidding out some or all of their benefits, they are able to control costs in the process.