IS ADMINISTRATIVE SERVICES ONLY (ASO) THE RIGHT CHOICE FOR YOUR ORGANIZATION?

In the world of employee benefits, the Administrative Services Only (ASO) funding model has been gaining traction for a while. Are you wondering whether it is suitable for your organization?

Traditional Employee Benefits vs Administrative Services Only (ASO) Employee Benefits

The traditional employee benefits plan funding model is well-known to most organizations and employers. In this conventional setup, the insurer shoulders the risk associated with the employee benefits plan. To transfer this risk, the organization pays a premium to the insurer, irrespective of how much the benefits are used. If claims exceed the insurer’s initial estimates, the organization is not required to make additional payments during the year. This structure provides a safety net, shielding the employer from unexpected or overwhelming claims.

Even if benefits are not fully utilized, the employer or organization continues to pay the same premium. In such cases, the insurer’s profits may increase as a result.

An Administrative Services Only (ASO) employee benefits plan entails the organization or employer taking on the responsibility of funding the benefits plan. Instead of transferring the risk to an insurer, the employer assumes the potential risks associated with unexpectedly high or catastrophic claims. This is why these plans are often referred to as self-insured or self-funded.

In this setup, the employer engages an external third-party to handle the administration of the employee benefits plan and disbursement of claims using the employer’s funds. The third-party is tasked with ensuring the confidentiality of employee information while assessing and processing claims.

ASO funding arrangements are primarily employed for health benefits, dental coverage, and occasionally, short-term disability benefits. Health benefits such as life insurance, critical illness insurance, and long-term disability are seldom incorporated into an ASO structure due to their infrequent, substantial claims, which are inherently difficult to predict.

Advantages of ASO

1. Tailored Benefits Management

Administrative Services Only (ASO) allows organizations to customize their benefits administration according to their unique requirements. This flexibility means you can tailor your health benefits plan to suit your workforce, offering a level of personalization that traditional plans may not provide. ASO empowers you to create a benefits package that reflects your company’s values and meets the diverse needs of your employees.

2. Cost Control and Transparency

One of the primary advantages of ASO is the transparency it offers in terms of costs. With ASO, you gain a clearer understanding of your benefit expenses, enabling better cost control. You’ll have direct access to claims data, allowing you to identify trends, analyze costs, and make informed decisions to optimize your benefits spending. This transparency ensures that your benefits program remains cost-effective and aligned with your budgetary goals.

3. Risk Management

ASO provides organizations with greater control over risk management. By self-funding your benefits plan, you have the flexibility to set aside funds for unforeseen circumstances. This proactive approach allows you to mitigate potential financial risks and ensures that your organization can continue to provide essential benefits to employees, even in challenging times. Plan sponsors also have the option to include a stop loss in their plan to further manage the risk of high-cost claims. The plan sponsor can decide on and set the stop less threshold at a specific amount. If claims exceed the stop loss amount, they are covered by the insurer rather than the employer.

4. Scalability and Growth

As your organization grows, ASO can easily scale with you. Whether you’re adding new employees, expanding into new regions, or adapting to changing workforce demographics, ASO can accommodate your evolving needs without the constraints of traditional benefit plans.

Good advice is key

Are you looking for advice on whether an ASO funding arrangement may be a good fit for your organization? Have you considered the cost savings that may come from switching to an ASO employee benefits plan? Review your options with one of our licensed advisors on the phone, orcontact us for a comparison quote.

Whether you’re looking for extended health and dental coverage, disability coverage, or life and critical illness coverage, GroupHEALTH has affordable benefit packages that work as hard as you do.