What is an Administrative Services Only (ASO) Plan?

An ASO is an alternative to a traditional employee group benefits plan. Under an ASO plan, the employer assumes the responsibility for funding claims costs. A third-party is appointed to administer the plan, known as a TPA.

One of the major concerns about ASO funding is the unpredictable nature of month-to-month claims experience. While traditional benefits’ plans offer predictable premiums over a 12-month period, claims within an ASO plan can fluctuate widely. To address this problem, some third-party administrators (TPAs) now offer budgeted ASOs, which allow for a fixed, monthly payment based on previous claims history. Budgeted ASOs provide monthly surplus and deficit reports to keep companies aware of their claims position.

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Is an Administrative Services Only (ASO) Plan the Best Fit for Your Company?

When considering an Administrative Services Only plan, you should consider:

• Your risk tolerance – With an ASO plan, should actual claims exceed the budgeted amount, you will be responsible to cover the deficit at the end of the year up to the amount of the stoploss. If the balance in your ASO exceeds claims for the year, you get to keep the surplus.

• How highly you wish to customize your plan – Generally, traditional benefits’ plans consist of the same components (things like life insurance, AD&D, Health Benefits and Disability Insurance). While there is some opportunity to customize with things like Health Care Spending Accounts, the options are limited. On the contrary, ASO plans allow for greater flexibility in plan customization, which may be important to help you to meet your benefits’ objectives.