Administrative service only (ASO) refers to a type of business arrangement used by employers who fund their employee benefit plan but prefer hiring an outside vendor to administer it.
What Are the Benefits of Administrative Services Only Plans?
The benefits of administrative service only plans include:
- Lower costs
- Possibilities to offer more fringe benefits to employees
- Protection offered for unforeseen expenses
- More transparency
- Improved cash flow
What Health Benefits Are Typically Provided by Administrative Services Only Plans?
Health benefits typically provided by administrative services only plans include:
- Short-term disability
- Long-term disability
- Health benefits
- Dental benefits
What Are the Drawbacks of Administrative Services Only?
The drawbacks of administrative services only include:
- Loss of profits
- Minimal protection against deficits
- Not always cost-efficient
- More financial risks for employers
What Is the Difference Between ASO and Traditional Administrator Agreement?
A traditional administrator agreement refers to an arrangement where an insurance company fully administers claims from employees and reimburses them according to the plan chosen by the employer.
With an ASO, employers need to cover claim costs. The insurance company only provides administrative services for plans.
When the costs are less than expected with a traditional administrator, the surplus remains with the insurance company. With an ASO agreement, the surplus is reinvested by the employer.
What Is Another Name for an Administrative Services Only Arrangement?
Administrative services only arrangements are often called self-funded healthcare.