Among the trends in the group benefits industry coming out of Benefits Canada‘s 2016 group benefits providers report is strong growth of the administrative services only option.
Insurance companies reported solid growth in non-insured deposits in the administrative category last year. With 6.9-per-cent growth across the industry in the administrative services only category last year, that was ahead of group life at 4.5 per cent and group health at 5.6 per cent.
One of the group insurance companies that grew quickly last year was Assumption Life. It’s one of the smaller companies at No. 18 on the list of the top 20 group insurance providers. But with a 10.5-per-cent increase in insured premiums and non-insured deposits, it was among the faster-growing companies along with Blue Cross Insurance Co. of Canada at 12.2 per cent. The biggest provider overall, Sun Life Financial, also saw healthy growth at 6.6 per cent.
Among the factors boosting Moncton, N.B.-based Assumption Life’s business was a decision in 2012 to expand its group benefits offerings beyond Atlantic Canada by partnering with third-party administrators in Ontario and Quebec.
The company saw an opportunity for growth, says Michel Allain, vice-president of actuarial services. “We put group representative in those regions who are responsible for developing relationships with distributors.”
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When it comes to the growth in the administrative category, Karen Taylor Smith, senior manager of group benefits at the Benefits Trust, says the high demand is in part due to greater awareness.
“Because there’s greater distribution and awareness about ASO funding, there’s a communications shift where more employers are beginning to understand that day-to-day expenses in a benefits plan . . . really are regular reimbursement type of expenses as distinct from insurance,” says Taylor Smith.
With the growth of third-party administrators, some small-and medium-sized companies are opting for administrative services only plans that had been more common among larger employers. At the same time, technological advancements such as drug cards and online claim systems have pushed administrative costs down, making the service accessible, according to Taylor Smith.
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Taylor Smith notes that with benefits plans becoming more expensive, employers are doing more to scrutinize the costs and look for value. The administrative option, she says, has the advantage of transparency.
“At the end of the day, for medical and dental expenses, the cost for that is the cost of the actual claim dollars paid out to each employee in aggregate plus the administration expense,” she says.
“So it’s a very straightforward relationship. It’s very clear and easy to understand where those dollars are being spent.”
Read: Transitioning to an ASO benefits plan
Employers, she adds, are also looking for tailored plans to suit the company and the employees.
“Rather than buy a package off-the-shelf plan, [employers] are looking for the opportunity to have something that’s more custom design,” says Taylor Smith.
“So being able to pick and choose what’s going to be included within that benefits promise that they’re providing for their employees” can be an advantage, she notes.
Read: Head to head: Comparing ASO to fully insured plans
Nevertheless, administrative arrangements can carry risks when employers find themselves with claims that exceed their budget.
“When there’s no limit or government coverage, employers need to be careful and really understand the risk they’re getting into and what coverage they’re getting from a [third-party administrator] in terms of stop-loss agreements,” says Allain.
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Download a PDF of the 2016 Group Benefits Providers Report