Administrative Services Only (ASO)
Administrative services only (ASO) is an arrangement in which a company funds its own employee benefit plan, such as a health insurance program while purchasing only administrative services from the insurer. This alternative funding option is a group health self-insurance program often used by large employers who opt to assume responsibility for all the risk, remaining exclusively liable for all financial and legal elements of the group benefits plan.
Available Administrative Services in an ASO Plan
In an ASO arrangement, employers purchase specific administrative services from a third-party administration (TPA) to be carried out by the TPA. Typical services offered in an ASO situation can include:
- Preparing administration manual.
- Managing COBRA, HRA, HAS, FSA, and the like.
- Communicating with employees.
- Managing benefits enrollment.
- Determining benefits.
- Evaluating claims.
- Processing claims.
- Paying benefits.
- Preparing government reports.
- Preparing summary plan descriptions.
- Conducting accounting matters.
Essentially a self-funded plan, an ASO arrangement is usually offered for short-term disability, extended health and dental care benefits, and sometimes long-term disability benefits. Employers rarely provide life insurance under an ASO system because of the large coverage amounts.
Protect Yourself in an ASO Arrangement
In an ASO arrangement, employers purchase stop-loss insurance to protect themselves from any catastrophic losses should their employees’ insurance needs become exorbitant because of severe illness or injury. The last thing you want is to be caught in the unlimited financial liability of ASO plans.
The stop-loss insurance involves paying a premium to the insurer in which claims that exceed the stop-loss level (often set at $10,000 per insured employee) become the responsibility of the insurer.
The self-funded status of an ASO plan is not altered with stop-loss insurance. It is necessary to have an insurance plan for your insurance plan, if you will, especially to cover expenses like costly prescription drugs. Without stop-loss insurance, the financial impact on your company under a large claim could be disastrous.
Why Choose ASO for Your Company
Group health insurance benefits do not manage themselves. No matter how large a company may be, you may not wish to handle all insurance issues in-house. Outsourcing the administration of your plan prevents your human resources team from enduring a learning curve and dealing with potentially confusing and detailed insurance matters where mistakes can easily be made and cost your company. In short, an ASO save your company time and money.
Smaller companies, if it’s financially feasible, can also benefit from an ASO arrangement, especially start-ups and small businesses that are not prepared to manage the complicated legal and administrative details of group health insurance and benefits.
Under an ASO contract, employers pay a fee to a TPA to handle claims processing, organize provider networks, and manage other health plan logistics. These tasks in the hands of someone outside your company also eliminates the need for you to hire a dedicated group health insurance employee, and eliminates the need to pay another full salary and benefits.
Companies have greater say over how their group health insurance benefits work under an ASO plan. In this arrangement, the employer controls their cash flow and only pays for claims when they are incurred.
Learn more about ASO arrangements and whether one is right for your corporation and employees. Speak with a knowledgeable representative from The Benefits Group today.