Administrative Services Only

What Does Administrative Services Only Mean?

Administrative Services Only (ASO) is a program established by employers to provide benefits, such as health coverage or retirement plans, to their employees. Under an ASO arrangement, the employer directly finances the benefit plan and pays for claims, rather than relying on a third party, such as an insurance company, to do so. This makes ASO one of the types of business insurance arrangements employers consider when they want more control over how their employee benefits are funded.

Insuranceopedia Explains Administrative Services Only

While an ASO plan is funded by the employer, a third party may be responsible for overseeing and administering insurance transactions, such as processing claims. However, the employer remains responsible for paying the claims. ASO is often used by larger employers who already carry mandatory coverages like workers compensation and want a similar level of cost control over their group health benefits.

Employers who utilize an Administrative Services Only system typically purchase stop-loss insurance, which ensures that another insurer will cover claims if they exceed the maximum amount the employer has set for employee coverage. The trade-off is that the employer takes on more financial risk in exchange for lower overhead, which is why ASO is usually weighed against fully-insured group plans when employers look at their overall small business insurance costs.