Small and medium-sized businesses have been challenged over the course of the COVID-19 pandemic—some severely so. Business has been down for many, and health measures aimed at keeping us safe have resulted in higher operating costs—and higher debt loads. As a result, cost containment has gained in importance— at the very same time employers are straining to hire and retain talented team members.
When it comes to group benefits plan design, one area for potential cost savings is switching from insured dental coverage to Administrative Services Only (ASO) coverage.
The Potential for Lower Cost
Since the business assumes the risk, it avoids paying premiums to cover claims costs. In a year where the group has few claims, the business stands to save on premium.
Dental benefits are typically a lower risk component of the group benefits plan, so employers can enjoy potential cost savings by assuming this risk, while keeping other benefits fully insured. Costs are further reduced by lower administration fees.
In scenarios where claims are higher than expected, stop loss coverage can help protect the business from exposure to catastrophic claims.
Increased Flexibility
In many instances, an ASO arrangement benefits both the organization and its employees. That’s because business owners can select their coinsurance and deductible levels as well as specific plan exclusions. This greater flexibility in plan design may be attractive when customizing plans to meet the needs of employees—a key to attracting and retaining talent.
ASO is not for everyone since some factors make dental claims more difficult to predict and increase the likelihood of a significant adjustment at annual reconciliation.