ASO (short for Administrative Services Only) 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.
As health care in Canada continues to evolve in a manner where less and less is covered under provincial health care plans (some would say two tier health care) more emphasis is placed on group or private insurance. Employers offering coverage for prescription drugs, dental, paramedical services (chiropractor, massage, etc), vision care, etc, are finding that claims are escalating year over year.
Rising claims means escalating costs as traditional group health insurers look for a 30-40% margin between cost of claims and the premium paid.
Compounding this problem is the fact that less insurers are offering group insurance than in years gone by.
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 an anonymous 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.
Aside from being less expensive, ASO plans are less restrictive than traditional plans. ASO plans can cover what traditional plans usually exclude:
When implementing an ASO plan it is important to check CRA guidelines – working with a good broker and professional, experienced provider is critical.
If you want more information, return to Group Insurance Canada to read more about all types of group.
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Always speak with a licensed insurance representative about your specific situation.
This site is general in nature and there may be errors or ommissions