No doubt you’ve heard the acronym “ASO” when talking about employee benefits coverage, but you’re wondering what it’s all about.
First off, ASO stands for “Administrative Services Only”.
In most instances, ASO involves the employer self-insuring the company’s Dental and Extended Health Care (EHC) claims (EHC includes prescription drugs). Either an insurance administrator or an insurance company adjudicates the claims (making sure that the claims meet the Canada Revenue Agency rules & regulations), and an administration fee is paid along with the claim amount to the insurance administrator/company. Any fully-insured benefits (life insurance, dependent life insurance, Accidental Death & Dismemberment coverage, Short Term Disability, Long Term Disability, and Critical Illness) remain with an insurance company. An employer also requires two other forms of coverage not required in a traditional benefits plan:
- Out Of Country Insurance.
- Out Of Country Insurance provides emergency medical coverage for employees and their staff when traveling outside Canada.
- Stop Loss Insurance.
- When the policy is implemented, the employer indicates how much Stop Loss Insurance coverage they want (e.g. $5,000 per employee, $10,000 per employee, etc.). In the event one of the employees were to become sick (and possibly be prescribed expensive drugs), the company’s premium dollars have to pay for the employee’s claims up to the stop loss amount.
So, why look at ASO? Many companies, tired of facing annual increases in their employee benefits premiums, have found that by self insuring via an ASO plan, they are able to keep their benefits costs down.
But, is an ASO plan the best solution for all employers? Absolutely not!
Some ASO providers state that ASO is ideal for companies with fewer than 10-20 employees. Keep in mind that the basis behind ASO is self-insurance, and a company with 10 employees has a smaller base to spread the risk across than a company with 100 employees. If an employee were to become sick, and were prescribed expensive drugs, any claims beyond the stop loss amount would be covered by the Stop Loss Insurance coverage. However, if those drugs prove to be ongoing, the insurance company may do one of two things:
- Increase the amount of the stop loss coverage (e.g. $5,000 to $7,500), meaning the employer’s premiums have to cover more of the claims.
- Exclude the ongoing costly prescription drugs from stop loss coverage.
With all that said, it’s important to know that not all ASO providers are created equal. That’s where we can help. We can help you find the most reputable ASO provider, with the best administration fees, service and customer service, and design the best plan for your needs.
If you are interested in obtaining more information on ASO plans, please contact Chris at 416-754-3910/1-800-773-8638 or at chris @ canadianemployeebenefitplans.ca.