What is an ASO Plan?
An Administrative Services Only or ASO Plan is an alternative way for employers to fund their employee group benefits. Using this funding model, an employer will assume the cost of predictable claims while being protected by pooled stop loss insurance.
Catastrophic risk elements of the benefits plan (Life Insurance, A.D. & D, and Long Term Disability) remain insured in a traditional fully insured pool.
Why are ASO Plans Growing in Popularity?
Administrative Services Only plans have historically been only accessible to “big business” due to the administrative and computing resource required. Smaller employers had very little choice in group benefits plan design.
But advancements in technology allowed a new breed of group insurance administrators to emerge – Third Party Administrators (TPAs) like The Benefits Trust – that began offering ASO Plans to smaller employers.
Frustrated by the lack of transparency and flexibility from their traditional group benefits providers, successful employers are turning to ASO plans in ever-growing numbers.
What is a Budgeted ASO Plan?
The Benefits Trust offers Budgeted ASO plans. With Budgeted ASO, you pay a predictable fixed amount every month based on your previous claims history. The budgeting process each year is straightforward. Should actual claims exceed the budgeted amount, you are responsible for the deficit. If your claims are less than anticipated, the surplus is yours to keep. However with full and transparent monthly reporting, you are always aware of your surplus or deficit position.
Comparing Budgeted ASO Plans to Traditional Group Benefits Plans
For a full discussion and comparison chart – click here
When comparing traditional plan funding with Budgeted ASO plans, it is important to remember that with Budgeted ASO you pay only for your actual paid claims experience. This works just as effectively for small groups of 5 to 50, as it does for large groups of hundreds of employees. And with the Budgeted ASO model, smaller employers gain full transparency and flexibility for their group benefits plans.
The key pricing factors to consider when comparing benefits plan providers are: the competitiveness of the administration fees for the services provided; and who has ownership of any surpluses or deficits (the employer or the insurer). In effect, in the benefits plan game, the employer becomes the “house”, and keeps any surplus in lower claims years, while being protected from the risk of catastrophic claims costs through pooled stop loss insurance.
Budgeted ASO plans set funding levels based on the same factors as traditional group benefits plans:
- Premiums for insurance to protect against catastrophic risk, such as life insurance, long term disability, out of country emergency medical, etc.,
- Claim costs for routine medical and dental claims, and
- Administration fees to manage the program.
Unlike a Budgeted ASO arrangement, the monthly premiums for traditional insured plans also include insurer reserves, and significantly higher inflation factors, which add to the renewal cost of an employer’s plan. Insurers also tend to apply high administration fees to smaller businesses, generally ranging from 25% to 35%.
Working with The Benefits Trust
The Benefits Trust, a Budgeted ASO provider, offers benefits plans specifically designed to serve the needs of successful smaller employers. The result is more competitive administration fees of 12% to 20% for the same size businesses (compared to traditional group benefits providers).
We work with your Benefits Advisor to build an Administrative Services Only Plan for your company. We can also refer you to a Benefits Advisor in your area with ASO Plan experience. Contact us today for more information on ASO Plans.