ASO (Admin Services Only) claims funding arrangements, primarily for EHC (Extended Health Care) and Dental claims, has been around for a few decades; however, group plan insurers have only been offering this option to smaller/mid-size companies for the past 10 years or so. Select insurers will allow an ASO funding arrangement for companies that have no fewer than 20 to 25 employees, depending on the average annual claims base. There are various reasons for this: increased competition, reduced risk, improved systems, improved market understanding, flexible pooling/Stop Loss arrangements, etc.
HFIB (HFI Benefits Inc.) uses ASO to reduce processing, inflation, and risk expenses, as well as to eliminate ultra-conservative insurer reserves that are built into a traditional group benefit plan. Our application of ASO significantly reduces the EHC and Dental rates by simply having the company take on a small and easily manageable amount of the plan’s claims risk. Insurance remains in place for the potential catastrophic risks like out of Canada travel or high domestic drug or medical claims.
At HFI Benefits, ASO policies are always through insurers and generally through the same insurer that holds the pooled components of coverage: Life, AD&D, LTD, dependent Life. There are a number of Broker/Advisor/TPA (Third Party Administrator) based ASO claims funding arrangements in the marketplace; however, our sense is that they will never be able to match or keep up to the insurers’ investment in systems development nor their reduced risk profile: a CRA audit risk being primary. In our opinion, the added value of using an established insurer for ASO policies is worth the nominal savings in expenses gained by going with a TPA; especially now that their systems accommodate direct claims submissions of paramedical practitioners like massage therapists, chiropractors and physiotherapists, and ancillary benefits like Vision, either at the point of sale or online through the insurer’s website.
We understand ASO funding arrangements very well and we use them for many of our clients, but they are not without risk and they demand a higher level of advisor expertise and support to help manage. It is not advisable to request ASO funding arrangements from your average broker.
Funding EHC and Dental claims through an insurer based ASO plan is a great way for an employer to get the best of both worlds when it comes to their benefit plan. They get the advantage of lower costs and therefore rates as it effectively eliminates all the insurer based, high margin, plan cost areas: premium tax, inflated reserves, inflated trend and the excess risk allowance charges; at the same time, employees are able to deal with the same insurer they do on all their other benefits: the same toll free #’s, the same booklet format, the same plan design, the same website access, the same smartphone apps, the same claims payment methods and the same fraud and adjudication controls and protections.
Q: How much can I save by having our EHC & Dental claims funded through an ASO arrangement?
A: Depending on plan design, the level of advisory advice that you’re currently receiving and the pooling arrangements (domestic and international), companies can expect to reduce their insured EHC and Dental costs by 7-12% per year.
Q: What’s the risk of going with an ASO EHC and Dental claims processing arrangement?
A: With proper catastrophic risk insurance in place for emergency out of Canada and domestic drugs and medical, the primary risk is that a company can no longer ‘walk away’ from an account deficit caused by more claims + expenses being incurred vs deposits submitted over a given year. But HFIB puts safeguards in place to ensure it rarely happens and if it does it’s to a nominal extent.