What is Administrative Services Only (ASO)?
Administrative Services Only (ASO) is a term commonly used in the context of employee benefits and insurance. ASO arrangements are an outsourcing relationship between an employer and an external service provider for administering certain employee benefits, particularly health and dental plans.
In an ASO arrangement
- Administrative Services: The external service provider, often an insurance company or a third-party administrator (TPA), manages the administrative tasks associated with employee benefits. This can include processing claims, handling enrolments and terminations, managing plan documentation, and providing customer support.
- Only: The term “only” in ASO emphasizes that the external provider is responsible solely for administrative functions and does not bear the financial risk associated with the benefits. Unlike a fully insured plan where the insurance company assumes the financial risk for claims, the employer retains the financial risk in an ASO arrangement, and the external provider is purely responsible for administrative tasks.
Key features of Administrative Services Only (ASO) arrangements include
- Cost Control: Employers have more control over the costs of the benefits plan because they are directly responsible for funding claims rather than paying fixed premiums to an insurance company.
- Flexibility: ASO arrangements allow employers to customize their benefit plans according to their specific needs, as they have more flexibility in plan design.
- Access to Data: Employers often have greater access to claims and utilization data, enabling them to make more informed decisions about their benefits program.
- Regulatory Compliance: The employer is still responsible for ensuring that the benefits plan complies with applicable laws and regulations.
Conclusion
Employers should carefully consider the advantages and challenges of ASO arrangements and assess whether they align with their organizational objectives and risk tolerance. ASO arrangements are more common among larger organizations with the resources to manage the financial risk associated with employee benefits.