Administrative Services Only - Terms, Defs, Examples

Employer pays

In this article we dive deep into Administrative Services Only (ASO), which services are available with an ASO plan, and its benefits.

What is Administrative Services Only (ASO)?

Administrative Services Only (ASO) is an insurance plan that provides coverage for the administrative costs of an insurance company. The plan does not cover the costs of claims or policyholders. Insurance companies use ASO plans to hedge against the risk of losses from claims or policyholders.

ASO plans are offered by both for-profit and non-profit insurance companies. The plans are typically provided to large organizations that self-insure their employees.

An ASO system will help you manage all your employee benefits, including group health insurance, life insurance, disability insurance, paid time off (PTO), retirement savings plans, and more.

ASO VS traditional insurance

There are several key differences between ASO plans and traditional insurance plans.

Feature Traditional Health Insurance Plans ASO Plans
Financial Risk Carrier carries the financial risk Employer carries the financial risk
Flexibility Less flexible More flexible
Cost May be more expensive May be more cost-effective
Administrative Oversight Less administrative oversight required by employer More administrative oversight required by employer

One of the most important differences is that, with an ASO plan, the employer (rather than the insurance company) takes on the financial risk for the employees' healthcare costs. It means that if the healthcare costs for a group of employees are higher than expected, the employer is responsible for paying the difference.

Another key difference is that, with an ASO plan, the employer has more control over the coverage offered and how much it costs. The insurance company sets the coverage and cost with a traditional insurance plan.

Finally, ASO plans often have lower costs for both the employer and the employees. It is because the employer can negotiate lower rates with providers and can choose to pass some of the savings on to the employees.

What is administration services available with an ASO plan?

employee health plan

An ASO arrangement involves employers purchasing specific administrative services from a third-party administrator (TPA). ASO offers a variety of services, including:

  1. Preparing an administration manual.
  2. Manage COBRA, HRA, HSA, FSA, and the like.
  3. Communicating with employees.
  4. Manage benefits enrollment.
  5. Determine the benefits.
  6. Evaluating claims.
  7. Process Claims.
  8. Paying benefits.
  9. Preparing government reports.
  10. The process of preparation of summary plan descriptions
  11. Conducting accounting matters.

Generally offering short-term disability benefits, extended health, and dental benefits, and sometimes long-term disability benefits, ASO is a self-funded plan. Employers rarely offer life insurance in ASO systems because of the large coverage.

Getting life insurance and extended healthcare benefits through an ASO may not be possible. When considering how different ASO arrangements may affect their organizations, employers must consider the risks and benefits of making such arrangements.

What are the benefits of ASO plans?

Precise, Needs-based Funding

Typically, an insurance provider determines the premium cost based on an estimate of a company's anticipated claims for the year. As opposed to ASO plans, which are funded based on actual paid claims, ASO plans are funded according to actual claim amounts.


While ASO plans require out-of-pocket expenses before reaching the stop-loss, they are typically cheaper than health insurance benefits plans.

Retention of funds

Employers may reinvest any funds left over after the third-party administrator has processed all claims for the year. A feature like this allows the company to offer health benefits that might not be available with traditional health insurance plans.

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What are some cons of having an ASO Plan?

It is a tradeoff between an ASO and a traditional insurance plan, just like most business decisions. The following are some disadvantages of ASO plans.

financial Disaster

Financial risks are substantial with administrative services-only plans. It is the employer's legal responsibility to pay all covered claims. An employer can save money by keeping their employees healthy. There is also a risk that the employer's finances will suffer if there are many costly claims.

Inadequate Coverage

An ASO arrangement may need to cover health benefits and life insurance adequately. Research the risks and benefits associated with an ASO plan thoroughly before applying.

Lack of Flexibility

The flexibility of an ASO plan may be lower than that of a fully insured plan. In an ASO, you might have less negotiating power or options when attempting to alter your benefits.

Frequently Asked Questions

  • In healthcare, ASO typically refers to Administrative Services Only (ASO) plans. These are self-funded health insurance plans in which the employer assumes all of the financial risk for the plan. ASO plans are typically used by large employers who have a stable workforce and can afford to take on the risk of healthcare costs.

    ASO plans offer several advantages over traditional health insurance plans. They can be more cost-effective, as employers do not have to pay insurance premiums. They also allow employers more flexibility in designing benefits plans that meet the needs of their employees. However, ASO plans also require more administrative oversight by employers, as they are responsible for managing all aspects of the plan.

Carin Vreede

Written by:

Carin Vreede

With years of experience in the HR field, Carin has a lot of experience with HR processes. As a content marketer, she translates this knowledge into engaging and informative content that helps companies optimize their HR processes and motivate and develop their employees.


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