Many large businesses have decided to utilize a self-funded health insurance plan, administered through Administrative Services Only (ASO) from a health insurance carrier, to cover the medical expenses of their employees. ASO plans help businesses control cost, offer flexibility and retain employees.
Many health insurance companies offer ASO plans, delivering administrative services, such as claim processing and billing, to employers. For example, with an ASO plan the employer funds the claim payments but pays an insurance carrier to process the claims. This provides a valuable service to the employer to control costs and improve retention of key employees.
Traditionally, ASO claim payments have been made via check. The insurance carrier issues the claim payments on behalf of the employer in the form of a check to the provider. Using MICR check printing technology, the insurance carrier is able to generate these checks using the employer’s bank account without having to purchase pre-printed check stock with the employer’s bank account information.
However, using checks as the method of payment can still be costly and inefficient. As an example, checks must be printed, stuffed into envelopes and mailed. Checks also need to be reconciled. And sometimes, these checks must be stopped and reissued. Or checks may need to be included in escheat (unclaimed property) reporting. The costs of check printing are significant and the use of checks as a method of payment is declining in popularity for most demographics. Today, there are more efficient ways to make payments.
Electronic payments provide a more efficient, less expensive and more secure method of payment. And new payment vehicles, such as single use accounts (SUA) and tokenized payments, provide additional benefits:
SUA payments are virtual credit cards that are only good for a specified amount. The credit card number is provided electronically to the provider.
Tokenized payments provide the ability to make payments to email addresses and cell phone numbers.
SUA and tokenized payment methods offer the added benefit of not requiring the insurance carrier to store and maintain provider bank account information.
Unfortunately, these more efficient payment methods are difficult to implement for ASO payments. Unlike checks, electronic payments cannot be issued by the carrier from an employer’s bank account to the providers. And all of these modern payment methods require special accounting procedures.
PayPilot® is a software solution created by Prelude Software that addresses these issues along with many others. PayPilot offers the flexibility and capabilities often inherently missing in carriers’ existing source systems. PayPilot can scale to work as narrow or as broad across the client’s enterprise to fill the functionality gaps in the existing payment processing workflows. By linking your existing siloed systems to the PayPilot solution, workflows can easily be automated, from payment request to payment creation and reconciliation. Reducing the manual steps in your payment process decreases handling costs and increases efficiency along your entire payment workflow.
For ASO payments, PayPilot automatically generates funding transactions in the form of ACH debits to transfer money from the employer’s bank account into the insurance carrier’s bank account. These funding transactions correspond directly to the outbound payments made to providers on behalf of the employer. PayPilot also generates the necessary general ledger transactions and reconciliation records for these payments.
ASO plans provide a great opportunity for businesses to design their own health coverage plans and control costs. And Prelude’s PayPilot software give insurance companies the ability to utilize modern payment methods to make efficient, cost-effective and secure payments.