What is Administrative Services Only (ASO)?

KEY TAKEAWAYS

• ASO insurance plans are exactly what they sound like the insurer only provides administrative services. So, the insurer does not take on any financial risk.
• Typically, ASO plans are used by large organizations that self-insure their employees.
• The advantage of an ASO plan is that you can customize it to fit your organization’s needs.
• The downside of an ASO plan is that the organization assumes all the financial risk for paying claims.

Types of ASO

There are two types of ASO plans: fully insured and partially insured.

A fully insured ASO plan is one in which the organization contracts with an insurance company. Thus, they provide administrative services. The insurance company assumes all the financial risk for paying claims.

With a fully insured ASO plan, the organization does not have to worry about paying claims if they exceed expectations. However, this type of plan is more expensive than a partially insured ASO plan.

A partially insured plan is one contracted with an insurance company to bring you administrative services. But the organization assumes some of the financial risks of paying for costly claims.

With a partially insured ASO plan, the organization is responsible for paying claims. But only up to a certain amount (known as the stop-loss limit). If you process claims exceeding this limit, the insurance company will pay for them.

Partially insured ASO plans are less expensive than fully insured ASO plans. But they are riskier because the organization is responsible for paying claims if they exceed expectations.

Advantages of Administrative Services Only (ASO)

There are a few key advantages of ASO plans:

Customization

You can customize ASO plans to fit the specific needs of the organization. This flexibility allows organizations to design a plan that works best for them.

No financial risk

The organization does not assume any financial risk. So there is no risk of having to pay out of pocket if insurance claims exceed expectations.

Predictability

Organizations can budget more easily for an ASO plan. This is because they know exactly how much they will need to pay for administrative services.

Disadvantages of Administrative Services Only (ASO)

There are also a few disadvantages of ASO plans:

All financial risk falls on the organization. If claims exceed expectations, the organization will have to pay for the additional costs.

Limited coverage

ASO plans usually only cover basic administrative services. So they may not be ideal for organizations that need more comprehensive coverage.

Difficult to set up 

ASO plans can be complex to set up and manage. So they may not be right for every organization.

So, is an ASO plan right for you?

ASO plans are not right for every organization. If you have limited cash flow or need an employee benefit plan, there might be an option for you. Employee health claims can get expensive fast. Not to mention all of the other unforeseen expenses in business.

Before deciding if an ASO plan is right for you, it’s important to understand the pros and cons. If you’re not sure if an ASO plan is right for you, talk to your insurance broker or agent. They can help you evaluate your options and find a plan that meets your needs.

Example of ASO

An example of an ASO plan would be if an organization contracts with an insurance company to provide administrative services. But the organization assumes some of the financial risks for paying claims. With a partially insured ASO plan, the organization is responsible for paying claims up to a certain amount (known as the stop-loss limit).

If claims exceed this limit, the insurance company will pay for them. Partially insured ASO plans are less expensive than fully insured ASO plans. But they are riskier because the organization is responsible for paying claims if they exceed expectations.

An ASO plan could also be set up to provide first-dollar coverage (meaning there is no deductible). Or it can be set up to have a high deductible and paired with a health savings account (HSA). There are many possible variations of ASO plans, which is one of the advantages of this type of plan.

Why Choose ASO For Your Company?

ASO is a good choice for companies that:

• Want to customize their plan to fit their specific needs
• Have a good idea of what their health care costs will be
• Are comfortable with assuming some financial risk
• Are willing to invest the time and resources needed to set up and manage an ASO plan

If you’re not sure if an ASO plan is right for you, talk to your insurance broker or agent. They can help you evaluate your options and find a plan that meets your needs.

Summary

ASO plans are a type of health insurance. Here, the organization contracts with an insurance company to provide administrative services. But the organization assumes some of the financial risks for paying claims. ASO plans have both advantages and disadvantages, so it’s important to understand both before deciding if an ASO plan is right for you.

If you’re considering an ASO plan for your organization, talk to your insurance broker or agent. They can help you evaluate your options and find a plan that meets your needs.