Introduction

The US$6.1 billion BAO market is a consolidated space dominated by a handful of players. However, the recent healthcare reform and the strategic shift from Defined Benefits (DB) to Defined Contributions (DC) have created increased outsourcing opportunities for the service providers. To capitalize on this increase in market potential, service providers are “on their toes”, not only adding depth to the services offered (with consumer-driven health plans, absence management, and consulting & participant advisory services), but also utilizing their technology and domain expertise to create innovative offerings (mobile applications, decision-support tools, and health insurance exchange solutions) to help buyers reduce their overall benefits cost. In such a dynamic landscape, give the increasing role of consumerization in benefits space, buyers’ requirements, too, have changed. As a result, buyers need to understand the service provider’s value proposition in its entirety while taking a holistic view of their own requirements, to create an effective and successful engagement.

In this research, we analyze the global BAO market across the following dimensions:

• BAO market overview
• BAO PEAK Matrix 2012
• Key insights into PEAK dimensions
• Areas of differentiation
• Implications for buyers and service providers

Scope

• At least one of the following core-benefits areas – Health & Welfare (H&W), DB, and DC
• Deal length is at least two years
• The buyer employee size is 3,000 or more
• All industries and geographies

Content

This report examines the dynamics of the global BAO service provider landscape and its impact on the BAO market. It gives an overview of the market and analyzes how the service providers differentiate themselves. Based on the comprehensive Everest Group PEAK Matrix, each of the 10 BAO service providers are segmented into Leaders, Major Contenders, and Emerging Players. Additionally, it provides key insights on the individual PEAK dimensions and implications for buyers and service providers. Some of the findings in this report are:

• Benefits Administration Outsourcing (BAO) market grew at a healthy pace of 13% to reach US$6.1 billion in annualized revenue in 2012. We expect the market to accelerate further in 2013-2014
• H&W providers will face capacity constraints as a wave of new deals hits the market before the PPACA start date. Providers who invest in capacity expansion will be better suited to cater to the huge surge in demand during 2013-2014
• Everest Group classifies 10 BAO service providers on Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix into three categories of Leaders, Major Contenders, and Emerging Players
• BAO providers need to be on their toes to address the changing needs of buyers, They differentiate themselves along multiple dimensions – geographic scope, industry, buyer size, process scope, technology offering, and global sourcing
• The recent healthcare reform has underscored the importance of health insurance exchanges. While most service providers are still defining their HIX strategy and its target market, few have already invested in a private HIX