Administrative Services Only (ASO) is an agreement that different organizations utilize to bring in funds for their employees’ benefit plans but take up a vendor’s service to implement it. The ASO only allows the insurance company to provide administration for the plans. During ASO plans, the insurance company usually provides negligible protection, which is opposite to the plans that are brought from the company.
For instance, a company can hire insurance companies to assess their claims for the health of the employees or the creation of employee health care plans, while they take up the responsibility of fulfilling the claims themselves. This type of contract is different from the case where the company buys the health plan from an outside vendor.
The plans for an ASO vary based on the agreement that the company has with the insurance company or TPAs (Third-Party Administrators). An Administrative Services Only plan is also self-funded and no money is received from the insurance company, whatsoever. The employer takes over the responsibility to pay the employees for the claims that are legible. Hence, the employers who use this ASO plan put an aggregate stop-loss where the company will agree to pay for the employee up to a certain level, for instance, $10,000 for each person who is insured.
How does ASO work?
A stop-loss will avert the employee from spending more on claims than what is expected. Hence, it helps to avert any financial loss as well. This plan is most suitable for corporations who have the width to take up self-funded plans. The insurance plans of ASO usually cover an employer for disability, health, and other dental benefits.
On rare occasions, they might also provide cover for long-term disability for employers who are more extensive with their finances and have the bandwidth to pay more. In ASO, the employer can take over control of the benefit costs that leads to the achievement of the organization’s needs. However, this is not ideal for every company as it also has its risks.
ASO vs. Traditional Administrator
The Administrative Services Only (ASO) allows the insurance company to provide administration for the plans. The insurer is the third-party administrator, and he has taken, who takes the duty to secure the claim costs.
In traditional administrator agreements, the insurance company fully takes the claims. The insurance company maintains and assesses the service and makes decisions for the cost of the claim that has been made.
Pros and Cons of Administrative Services Only (ASO)
The cost that is provided for the insured plans is dependent on the assessment done by the company for a year. In the case of an ASO, the annual funding level of the company is responsible for the actual paid claims that are made. If the claim is less than what was decided, the employers will retain the surplus and the reserves will be reinvested. This surplus will then be converted into benefits, which would usually be covered by conventional health plans.
The cost of ASO is usually less than the traditional administrator plans where the fee is paid to the insurer rather than the salaries being dedicated to the employees. In contrast, an employer is responsible for the deficit claims that go over the amounts that are allotted. Uncertain events are of special concern since they can often exceed the budgets that are allotted.
In certain cases, the ASO is not advised for taking up life insurance or healthcare benefits that are extended. Employers need to compare and contrast the risks and benefits related to both types of plans, and also the different types of ASO plans available that can affect both the budget and the organization at varying levels.
