ASO vs. Group Benefits Insurance in Alberta: What’s Best for Your Business?
- patrick83738
- Sep 19
- 3 min read
Updated: Oct 1
When it comes to providing benefits for your employees, Alberta businesses face important choices. Two popular options are Administrative Services Only (ASO) funding and traditional group benefits insurance. Each has unique pros and cons that affect cash flow, risk, and long-term costs.
This guide breaks down both approaches so you can decide what’s right for your business and your employees.
What Is Administrative Services Only (ASO)?
Administrative Services Only (ASO) is a funding method where a third-party administrator (TPA) manages your benefits plan. Instead of paying a fixed premium to an insurance company, your business pays only for:
Actual employee claims (such as health, dental, or vision).
Administrative services (claims processing, enrollment, and support).
ASO can be highly cost-effective if your employees are generally healthy and your company has predictable cash flow. You avoid paying for unused insurance coverage, and you keep savings when claims are lower than expected.
💡 Example: If your business averages only $2,000 in monthly claims, that’s all you pay — instead of a flat $5,000 premium.
What Is Group Benefits Insurance?
With group benefits insurance, your business pays a fixed monthly premium to an insurance company. The insurer then assumes the risk of covering claims, regardless of whether they are higher or lower than your premiums.
This approach is attractive for businesses that want predictable budgeting and a more hands-off process.
Annual Renewal and Premium Adjustments
Insurance policies are renewed annually. Each year, the insurer reviews claims history, demographics, and risk factors to set new premiums.
If claims are low, increases may be modest.
If claims exceed expectations, premiums can rise sharply.
💡 Example: Paying a $5,000 monthly premium may feel stable, but if claims consistently hit $10,000, expect higher rates at renewal.
Alberta Tax Note
In Alberta, health and dental insurance premiums carry a 3% provincial premium tax. This does not apply to ASO funding, which can make ASO even more attractive for some employers.
Comparing ASO and Group Benefits Insurance in Alberta
Cash Flow Considerations
ASO works best for businesses with steady revenue and low claims.
Group benefits insurance is better for businesses with fluctuating income that need stable monthly costs.
Risk of Discounts
Carriers sometimes offer initial premium discounts (e.g., 10%). While attractive, these can vanish at renewal — leading to sudden, steep increases.
💡 Example: A $500 discount disappearing could raise premiums from $5,000 to $5,500 overnight.
Underfunding Risks
With group benefits insurance, if claims exceed premiums, insurers recoup costs through future increases. With ASO, your funding adjusts directly to actual claims, but you must be diligent about monitoring expenses.
Which Option Fits Your Alberta Business?
When deciding between ASO and group benefits insurance, ask:
What does my cash flow look like?
Stable? → ASO could save money.
Fluctuating? → Insurance may provide stability.
How healthy is my workforce?
Low claims? → ASO may be ideal.
High claims? → Insurance spreads the risk.
How hands-on do I want to be?
ASO requires active monitoring.
Insurance is more hands-off.
Do I rely on discounts?
Be cautious about introductory offers that may vanish later.
Final Thoughts
Choosing between ASO funding and group benefits insurance isn’t one-size-fits-all.
ASO: Best for organizations with steady cash flow and healthier employees.
Group benefits insurance: Best for businesses wanting predictable costs and less administration.
At SAFE CREST INSURANCE INC., we specialize in guiding Alberta businesses through these decisions. Whether you’re in Calgary, Edmonton, or anywhere across the province, we’ll help design a plan that balances cost, stability, and employee well-being.
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