ASO as a Group Benefit Funding Method

Many employers offer group insurance programs to provide security for their employees, Budget conscious business employers are also looking for where they can get the biggest bang for the buck and an ASO (Administrative Services Only) plan might be for them. In Canada there are basically four different methods of funding benefits:

•  Pooled
• Experience Rated
• Retention Accounting
• Administrative Services Only (ASO)

The names of the above may differ from company to company but these are essentially the standards in the insurance industry. The last funding method is the ASO, and this type of funding method has been getting a lot of hype because of because of the potential cost saving benefits to the employer. Although there are some carriers and Third Party Administrators offering ASO’s on small groups, it is often seen with large employers with a stable and predictable claiming pattern.

An insurance carrier is contracted only to adjudicate the claims on the employer’s behalf. Essentially this is a self-funded group benefit plan. There is no insurance element with and ASO, the only exception is the pooling protection for large Health claims in Canada. An ASO does have quite a bit more risk as the insurance company or third party administrator does not keep any reserves and the financial risk is taken on by the employer.

An ASO may be a good solution for your company if you can tolerate the expenses fluctuating in accordance with employee claims and if you feel that the risk is worth the potential for cost-savings.