ASO Revenue

[LuciP-NHP]

I was wondering where the proper placement for ASO related revenue should be shown on the income statement. I thought it should be a write-in on line 7. However, the instructions are not quite clear as to identifying what should be in this line regarding Health insurance.
Thank you.

[Glenn]

Hello,
ASO Revenue is to be offset to expenses. Here is an excerpt from the U&I Part 3 Line 19 which would support the admin fees being offset to the expenses.

U&I Part 3 line 19:
Line 19 Reimbursements by Uninsured Plans


Report as a negative amount, pharmaceutical rebates of uninsured plans that are received or change in due and uncollected by the reporting entity, to the extent that they are in excess of amounts to be remitted to the uninsured plan, administrative fees, direct reimbursement of expenses, or other similar receipts or credits attributable to uninsured health plans and the uninsured portion of partially insured accident and health plans. Deduct administrative fees and related reimbursements from general administrative expenses or claim adjustment expenses if the administrative services provided include services for claim adjustment expenses as defined in SSAP No. 55 Unpaid Claims, Losses and Loss Adjustment Expenses.

Refer to SSAP No. 84 Health Care and Government Insured Plans Receivables for accounting guidance.

This guidance should assist you with the proper reporting for Page 4 as well.

Regards,
Glenn S Sackett

[LuciP-NHP]

Thank you for your reply. I agree that the ASO revenue should be offset in the expenses. However, I wanted to confirm the recognition of the ASO revenue in the revenue section. Should that be shown on line 7 of the income statement as a write-in? Also, if so, the instructions only mention Life and P&C companies so I wanted to make sure that this was applicable to Health insurance companies as well.

[Glenn]

Hello again,
ASO revenue is to be offset with the expenses as previously replied. U&I Part 3 instructions support this. See my previous reply with the excerpt of instructions for U & I Part 3.

Page 4 line 7 is for NON HEALTH revenue ( if you wrote Life or P&C type products as well i.e. auto , homeowners, Term Life, Whole Life), a few examples.

See Line 7 instructions:

Line 7 Aggregate Write-ins for Other Non-health Revenues
Enter the total of the write-ins in schedule Details of Write-ins Aggregate at Line 7 for Other Non‑health Revenues.

ASO Revenue is fees from Health revenue and should be offset to the Expenses as noted.

If you believe you have a revenue item to report outside of the sources typically in an ASO arrangement ( and ASC) then maybe you should consult with your State Insurance Dept.

The guidance still suggest offsetting the revenue with the expenses.

Please see NAIC instructions for U&I part 3 plus SSAP 55 and 84.

Regards,
Glenn S Sackett

[LuciP-NHP]

So, based on your statement, the ASO revenue is considered Health Revenue, so therefore it should be included in line 2 of the income statement? I think that is the source of my confusion. I thought it needed to be separated from there?
This is new territory for my company (entering into the ASO business), so I want to make sure we understand all the pieces.
Perhaps I am not capturing the entire process?

[Glenn]

Hello again,
No, ASO revenue is not line 2.It definitely is NOT recorded with premiums.
All of my responses have been consistent and I have advised you in line with the NAIC instructions . ASO revenue should be recorded as an offset to your expenses. Please refer to my earlier responses.
You can validate with you state insurance department and auditors as well.

Regards
Glenn S Sackett

[ptannos]

Could ASO revenue also be on Line 21 (P4)?

[Glenn]

Hello ptannos,
In this thread I have been consistently replying that ASO Revenue ( and ASC revenue if applicable) are to be offset in the expenses on page 4. The ASO revenues can offset Claim Adjustment Expenses ( page 4 , line 20 ) OR General Administrative Expenses ( page 4, line 21). This reporting is in synch with U&I Part 3 line 19 - Reimbursements by uninsured plans.These are the credits on the U&I part 3 exhibit.

so the short answer to your question is YES.

See my earlier responses please.