Administrative Services Only (ASO) plans allow employers like yourself to pay for your employees more predictable claims that would occur in dental, vision, or paramedical services. With ASO plans, your employees can still receive a plan design that they would typically see from an insurance provider, but the difference is in how it is funded. 

While you can continue to provide insured benefits such as travel insurance, long term disability, and life insurance to your employees, an ASO plan has the potential to reduce costs for predictable claims. 

If you choose to go with the insured model, you are contracted to pay a predetermined premium for the year. Your insurance provider will then cover all employee claims even if the claims submitted are more than or less than the premium they billed you. For example, if your annual group benefits claims are less than your yearly premium, you will still have to pay the contracted premium. However, if your employees claim amount exceeds the premium, you will still only pay the contracted amount. 

In an ASO plan, you will pay all of the claims submitted by your employees, plus a reasonable administrative fee to have your insurance company process the claims. 

The key to choosing the right approach is to make sure you understand the factors that come with an ASO plan.

• Administrative fees: In addition to any claims, built-in fees are included in the administrative fee including:
  - Advisor commission fees
  - Target loss ratio
  - Pooling charges
  - Insured but not reported (IBNR)
• Cash Flow: You must be prepared for potential disruptions to your company’s cash flow from surprise claim matters because unlike an insurance premium, your expenses under an ASO plan will not be predetermined. However, most claims are usually predictable in the long term but require cash flow to cover claims immediately. 
• Financial Analysis: Conducting a financial analysis of your claim history while factoring in future trends can help you determine what approach is best for your company.