“Normal is just a setting on your dryer.” That phrase captures the confusion surrounding Administrative Services Only (ASO) benefits plans. Many advisors view ASO as unpredictable or limited to large corporations. The real risk lies in continuing to place clients into traditional insured plans that are often bloated with high fees, unclear costs, and rigid structures.
This blog gives a clear understanding of how budgeted ASO works, the value it offers, and how to position it confidently with clients who are ready for a more strategic approach to benefits planning.
What ASO Really Means in Benefits Planning
ASO, short for Administrative Services Only, is not full self-insurance. It is a funding method used for specific benefits such as health, dental, and sometimes short-term disability. Other elements like life insurance, accidental death and dismemberment, long-term disability, critical illness, and out-of-country coverage remain fully insured.
In an ASO arrangement, the employer funds actual claims instead of paying traditional insurance premiums. Budgeted ASO introduces predictability by using phantom rates based on historical claims. These rates are set annually, giving your clients a familiar monthly cost structure similar to a conventional plan, while offering significantly more control.
ASO Isn’t Just for Big Companies
Many advisors are still told that ASO plans only work for companies with 100 or more employees. This perception was shaped by older models where only large organizations could manage the volatility of claims under pure ASO structures. Today, budgeted ASO is designed specifically to serve small and mid-sized businesses with the tools to manage their risks effectively.
Traditional insurers often charge administrative fees that can reach between 25 and 35 percent, known as the Target Loss Ratio. In contrast, budgeted ASO plans typically operate between 10 and 20 percent, and provide full transparency on costs. Clients are also protected from large claims with pooled stop loss insurance. Protection levels can be set according to business needs, starting at lower thresholds such as $7,500 and extending to $10,000, $12,500, $15,000, and higher. The key factor is not company size, but whether the client wants to approach benefits with a smarter, longer-term mindset.
Helping Clients Budget What’s Predictable, Insure What’s Not
Most insured group plans bundle premiums for both high-risk and everyday claims. These include dental cleanings, common prescriptions, and vision care, which are all predictable and routine. These claims do not require insurance. They require effective budgeting.
ASO allows clients to distinguish between what should be budgeted and what truly needs to be insured. High-frequency, low-cost claims can be paid from the employer’s budget, while rare, high-cost events like serious medical conditions or major drug treatments are covered through pooled insurance. This creates a logical funding structure that matches the real-world usage of benefits.
Clarity, Oversight, and Addressing Common Misconceptions
One of the most common frustrations with insured plans is the annual renewal. Employers often receive new rates without a clear explanation. Budgeted ASO changes that experience. Clients receive monthly financial statements showing exactly how funds are used. They see the breakdown of claims, administrative fees, insurance costs, and whether they are in a surplus or deficit position.
This transparency makes renewal discussions straightforward. When clients understand their plan performance throughout the year, there are no surprises. In fact, some advisors report that renewal conversations with budgeted ASO clients are the simplest meetings they have all year.
There are also lingering myths about what ASO can or cannot do. Some advisors hear that ASO plans cannot include drug cards or fraud prevention. Others assume they cannot be used with cost sharing or employee deductions. These beliefs are incorrect.
Budgeted ASO supports drug cards through trusted platforms like ClaimSecure. Trained adjudicators review claims patterns to identify fraud early. Cost sharing functions just as it does in traditional plans, using phantom rates to determine payroll deductions. Claims are reviewed based on the employer’s benefit services contract, ensuring accuracy and governance.
ASO Works in High Turnover Environments
Some employers worry that a high turnover rate makes ASO a poor fit. That assumption misses an important opportunity. Budgeted ASO actually gives employers more control in these scenarios. Plans can be tailored to offer different coverage levels based on role or tenure. For example, new hires may receive access to a healthcare spending account, while longer-term employees receive enhanced coverage. This approach limits exposure to high-cost claims from short-term employees while promoting retention.
One hotel client adopted a phased benefit structure where employees gained greater reimbursement after staying with the company for multiple years. Although benefits costs increased, employee turnover decreased significantly. The savings from lower recruitment and training costs more than justified the plan structure. For advisors, this is a powerful example of how benefits strategy can contribute to broader business performance.
Why The Benefits Trust Is a Reliable ASO Partner
Not all third-party administrators offer the same level of service. Some simply repackage insurer offerings. The Benefits Trust operates differently. Since 1994, we’ve delivered custom, budgeted ASO solutions for businesses of all sizes. As one Canada’s largest independently owned third party administrators, The Benefits Trust builds flexible plans in collaboration with a wide range of insurers and providers.
What sets us apart is the level of attention and service. Clients speak with real people. Claims are reviewed by qualified adjudicators. Advisors receive support throughout the sales and service process. This commitment makes The Benefits Trust a reliable partner for advisors who want to offer better options and build lasting client relationships.
Bring a Better Option to the Table
Budgeted ASO offers a more efficient, transparent, and sustainable way to fund employee benefits. It’s not just an alternative to traditional plans, but it’s a better way to keep the benefits promise employers make to their teams.
Reach out to The Benefits Trust to learn how a budgeted ASO solution can help your clients manage costs with confidence and customize plans that align with their business goals.
