With the economy still on shaky ground, the benefits administration outsourcing market is one field that remains stable.

Outsourcing is projected to grow 12-18% this year, thanks to factors such as increasing administrative burdens associated with health care reform and the rising value proposition of global sourcing, according to the latest Everest Group human resources outsourcing market report.

"While cost reduction has always been an important driver for BAO, it gained further prominence with the pressures of the recent economic downturn and the need to address rising healthcare costs,” says Rajesh Ranjan, research director for the global consulting and research firm. “Buyers are also increasingly looking to BAO to better manage the complexities and burdens associated with compliance issues and provide improved employee engagement and communications platforms that help employees make better health care and retirement decisions."

The report, "Benefits Administration Outsourcing — Resilient Demand, Dynamic Supplier Landscape," shows that more than 60% of BAO contracts since 2006 include some type of offshoring component. Although North America continues to be the dominant market, adoption is increasing in European countries — particularly in the United Kingdom.

Looking for quick cost reductions, most buyers are signing deals for single-country operations only, with defined contribution being the most frequently outsourced area, according to the report.

However, health and welfare brokers and consultants should take note as well, as the report shows these benefits administration needs to be growing at an increasingly faster rate over the past few years. Additionally, nearly three-quarters (70%) of BAO adopters are mid-market size companies.

As for the suppliers, increasing consolidation continues. Recently acquired by Aon, Hewitt is the leading global supplier, followed by Fidelity. Together, they account for 40% of the market in terms of participants managed and annual contract value, according to Everest.