What Does Administrative Services Only Agreement (ASO Agreement) Mean?
An administrative services only (ASO) agreement is a scheme in which an organization pays another organization to perform administrative functions related to insurance or benefits. By only outsourcing the administrative functions, organizations can handle claims themselves and avoid paying insurance premiums.
Insuranceopedia Explains Administrative Services Only Agreement (ASO Agreement)
Insurance companies might still be involved in ASO agreements. However, unlike a traditional employee benefit plan, the insurance company only handles administrative services such as processing claims, but will not make any of the benefit payments.
Companies that use these schemes save in premium costs, but they assume more risks. It adds a certain amount of unpredictability to benefit programs because the employer has no way of knowing ahead of time how much they will have to pay out in claims.