Understanding Level-Funded Plans vs. Administrative Service Only (ASO) Plans: Which Plan is Right for You?
In the realm of employee benefits and health care coverage, navigating through the myriad of options can often feel daunting. For businesses aiming to provide comprehensive health benefits while maintaining cost-effectiveness, two popular choices stand out: Level-Funded Plans and Administrative Service Only (ASO) Plans. Below, we’ve outlined these two types of plans, detailing what each one includes, highlighting their benefits, and discussing who might benefit the most from each.
Level-Funded Plans:
What are they? Level-funded plans are a hybrid between fully insured and self-funded health insurance options. They offer the predictability of fixed monthly costs, akin to traditional insurance plans, while incorporating the potential cost savings associated with self-funded plans.
How do they work? With a level-funded plan, the employer pays a fixed monthly premium to a third-party administrator (TPA), such as Blackhawk Claims Service. This premium covers claims payments, administrative fees and stop-loss insurance. At the end of the year, if claims are lower than anticipated, the employer may receive a refund or credit towards the following year’s premium. If the total claims exceed the fixed payments, stop-loss insurance covers the rest.
Benefits:
- Cost Control: Level-funded plans often provide cost savings compared to traditional fully insured plans, especially if the claims are lower than expected.
- Flexibility: Employers can customize plan designs to meet the specific needs of their workforce, including options for wellness programs and other incentives.
- Transparency: Detailed reporting from the TPA helps employers understand their claims experience and make informed decisions about future benefit offerings.
Who might benefit? Small to mid-sized businesses looking to manage health care costs while offering robust benefits to employees. Level-funded plans are especially beneficial for organizations with relatively healthy employee populations, as they can benefit from potential premium refunds.
Administrative Service Only (ASO) Plans:
What are they? Administrative Service Only (ASO) plans are a straightforward arrangement where the employer self-funds the health benefits but outsources administrative tasks to a TPA, such as Blackhawk Claims Service.
How do they work? Under an ASO, the employer assumes the financial risk for paying employees’ health care claims. The TPA handles administrative duties such as provider network management, claims processing and member support.
Benefits:
- Customization: Employers have the flexibility to design benefit plans that align closely with their organizational needs and budget constraints.
- Cost Savings: ASOs often result in lower overall costs compared to fully insured plans, as employers avoid paying premiums to insurance carriers and can negotiate directly with health care providers.
- Control: Employers retain control over their health care spending and can adjust plans as needed based on claims experience and financial goals.
Who might benefit? Large organizations with stable cash flow and a desire for more control over their health care expenditures. ASOs are also attractive to employers seeking greater flexibility in benefit plan design and administration.
Choosing the Right Plan for You:
When deciding between a level-funded plan and an ASO plan, it’s crucial to assess your organization’s financial stability, risk tolerance and long-term health care strategy. Both plans offer distinct advantages depending on the size of your business and employee demographics. By understanding the nuances of each option and leveraging expert guidance, you can make an informed decision that supports both your business’s financial goals and your employees’ well-being. Consulting with a reputable TPA, such as Blackhawk Claims Service, can provide valuable insights and help tailor a plan that meets your specific needs.
At Blackhawk Claims Service, we specialize in providing comprehensive TPA services tailored to your organization’s unique requirements. Contact us today to explore how we can help you navigate the complexities of health care benefits with confidence and clarity. Your employees deserve the best – let’s work together to make that happen.