Get More Bang for Your Benefits Buck – Budgeted ASO
Administrative Services Only (ASO) plans are an alternative to traditional group health insurance. They are growing in popularity in Canada among small and medium businesses because of the flexibility in plan design and potential cost savings.
What is ASO?
Administrative Services Only is a model that allows an employer to self-insure health expenses. The employer will typically assume the cost of predictable claims and add Stop Loss insurance for large claims.
Insurance will often remain in place for life, disability and out or province travel coverage. The Stop Loss would apply to the other coverage (i.e. prescription drug) after a certain deductible per employee (or family) has been exceeded.
In order for benefits to employees to be non-taxable and for expenses to be tax deductible a third party administrator should be used. The third party administrator reports all claims by type and by employee. This is done in a confidential manner in accordance with PIPEDA (Privacy). This information allows the employer to control medical and other health related costs.
This means that the costs of the benefits are claim driven instead of premium driven. Employers will therefore notice a drop in cost as much of the administrative and insurance costs are reduced or eliminated. This structure does not necessarily increase the risk to the company, and generally results in costs savings of around 10% per year compared to insured plans.
Other Benefits of Administrative Services Only
Aside from being less expensive, ASO plans are less restrictive than traditional plans. ASO plans can cover what traditional plans usually exclude:
- Cosmetic dental treatment
- Elective medical treatments (cosmetic surgery)
- Prescription drugs normally excluded from health insurance plans (fertility, weight loss, anti smoking)
- Over the counter drugs prescribed by a physician
- Nursing care
- Institutional care
- Dental Care (including orthodontic)
- Other medical practitioners (chiropractors, dietician, naturopath, acupuncture, massage, etc.)
When implementing an ASO plan it is important to check CRA guidelines – working with good broker with lots of ASO experience is a must and a professional, experienced provider is critical.