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ASO Offers Cost Savings

There is money to be saved and reinvested into benefit plans by moving to an administrative services only?(ASO) arrangement, says Jamil Jamal, a benefits consultant and practice leader at People Corporation, in the National Payroll Institute ‘Conference 2022’ session ‘Employee Benefits in a Pandemic: Past, Present, and Future, The Pivot to Virtual Health.’ He said the claims experience during the pandemic magnified the benefits of ASO benefit programs. While group insurers did offer premium reductions for dental and extended health care shortly after the pandemic started in 2020, the claims experience showed these dropped to almost nothing and this benefit reduction merely reflected that. With an ASO arrangement, the employer pays for most benefits and insures things like life insurance and long-term disability which have small premiums because they are less utilized. With a traditional fully insured plan, the premium is based on the claims experience. About70 per cent of the premium cost is based on claims. The remainder is for reserves, profit, commissions, inflation, risk charge, and administration. However, some of these charges are outdated. The reserve charge is a leftover from the 1970s when claims could take up to six months because they were mailed in and the reserve covered the insurer if the client changed plans. He said that charge is no longer relevant. Another issue for fully insured plans is premiums will go up if the claims experience does. However, premiums are only reduced if they fall 10 per cent below the target loss ratio. ASO plans eliminate this type of charge along with others like the reserve fee and the built-in profit. And with proper insurance protection these plans can accommodate stresses like high cost drugs, he said.

Carbon Emitters Targeted By CEC

A group of institutional investors and financial firms is targeting TSX-listed companies in high carbon-emitting sectors as part of an effort to drive the transition to a low-carbon economy. Climate Engagement Canada (CEC) ? which includes the asset management arms of the big banks and insurers along with other major institutional investors ? has identified 40 public companies that it plans to engage with as shareholders. Those efforts will aim to push the companies to disclose their climate data in line with the Task Force on Climate-Related Financial Disclosures (TCFD), to adopt strategies to cut their emissions, to set relevant targets, and to ensure accountability and oversight of the risks and opportunities posed by climate change. The group will also push the companies to bring their own advocacy efforts in line with the goals of the Paris Agreement, which include limiting global warming to 1.5°C. The 40 companies were identified as “the top reporting or estimated emitters” on the TSX or those “with a significant opportunity to contribute to the transition to a low-carbon future.” One-quarter of the companies are in the energy sector, while the mining and utilities sectors account for 20 per cent each. Consumer staples names make up 12.5 per cent of the list, followed by transportation at 7.5 per cent. The rest are in the materials, industrials, and consumer discretionary sectors.

For details on these stories, visit www.bpmmagazine.com

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