How you choose to proceed will depend on the level of premium risk and claim risk you are willing to accept on behalf of your business and employees. An employee benefits specialist can help you examine these options and recommend the right funding option, coupled with an appropriate plan design for your business.

The Fully Insured Plan:

With a fully insured plan, the business agrees to pay a monthly premium to the insurance carrier. In turn, the insurance carrier assumes responsibility for all eligible claims payments, as defined by the chosen plan design. The employees immediately have access to all the benefits included in their plan, which could include prescription drugs, dental, semi-private hospital coverage, vision care, etc. A review of claims and plan pricing is then negotiated annually. An advisor specialising in employee benefits will negotiate with the insurance carrier on your behalf and explain how your claims experience is impacting your plan pricing.

Administrative Services Only (ASO):

From the employee point of view, the ASO plan functions identically to the fully insured plan. Where this option differs is in the premium risk to the business. With ASO funding options, premiums are a function of the claims paid plus an administration fee to the insurer for processing the claims. Assuming claim patterns are normal during the year, the claims paid plus the administration fee can total less out of pocket money in comparison to the fully insured monthly premium. However, for this cost savings, the risk of a higher than anticipated claims is transferred to the business; and there lies the “risk/reward” decision. It’s important to remember there is an additional potential upside; claims being less than expected. That is where ASO funding becomes very attractive. The business owner must understand and be prepared to assume premium fluctuations resulting from claim volatility.