Guide to Administrative Services Only (ASO) Benefit Plans

Updated March 31, 2023

Businesses that provide benefits packages to their employees often aim to find a plan that best suits the needs of the staff and budget. They can either offer a traditional group plan or an administrative services only (ASO) plan. Learning what this package is and how it works can help you understand your employer's plan or decide whether to suggest this kind of plan when working in a human resources (HR) position.

In this article, we explain what an ASO plan is and answer frequently asked questions about it.

What is an ASO benefit plan?

An ASO plan, or "administrative services only," is a benefit plan in which the employer funds the benefits for employees rather than an insurance company. For example, a business can choose to pay for its employees' health care rather than using an external insurance company to cover the costs. In many cases, the business hires an insurance company for administrative tasks, such as evaluating and processing claims but handles the payment on those claims themselves. ASO plans primarily appear in larger organizations, which have enough employees that they can evenly divide the risk of more costly claims.

The main reason a business chooses to use an ASO plan is because of the cost. If the business pays out less than it initially predicts over a year, it can reinvest the surplus back into itself. In addition to cost, employers with ASO plans can offer employee benefits that conventional insurance providers may not offer. They can then use this plan to their advantage during the hiring process to attract more qualified candidates.

Related: Base Salary and Your Benefits Package

Difference between an ASO plan and a group health care plan

The difference between an ASO plan and a group health care plan is who pays for the benefits. With an ASO plan, the employer pays for most of the claims from its own budget unless the claim surpasses an established stop-loss agreement. With a group health care plan, the external insurance agent handles and pays for any claims.

In a group health care plan, the employer purchases a health care plan from the insurance agency and the agency provides the funds and payments for claims. This health care plan typically covers all employees within the business, along with their eligible dependents.

Frequently asked questions

What services does an ASO plan include?

When an employer enters into an ASO arrangement and pays for administrative services, the third-party administrator may complete the following tasks:

  • Preparing a benefits administration manual with the terms of coverage

  • Managing aspects of the Consolidated Omnibus Budget Reconciliation Act (COBRA) for current employees

  • Overseeing health reimbursement accounts (HRAs), flexible spending accounts (FSAs) and health savings accounts (HSAs)

  • Assisting with the benefits enrollment process

  • Communicating with employees and answering their questions in real-time or within a certain number of hours or business days

  • Ensuring employees understand their rights in terms of health insurance coverage

  • Completing accounting tasks

  • Evaluating and processing claims

  • Adhering to an established privacy policy to protect employees' information

Can only large businesses use ASO plans?

ASO plans typically occur in larger businesses that can spread the risk out among many employees, but no restriction prevents a smaller company from using an ASO plan. Smaller businesses may work to determine the benefits of offering an ASO plan versus the costs they may accrue. A small business may also consider adding in a stop-loss agreement to ensure it doesn't pay more than it can afford for unexpected claims.

How do businesses advertise the benefits of ASOs to potential employees?

Businesses that use ASOs can attract talented employees by highlighting this benefit when they're looking to fill open positions. An employee may find this plan enticing because they may be able to receive unconventional benefits that traditional group health care plans don't cover.

An employer has some creativity in choosing the direction they want to go with providing benefits, which can be appealing to an employee who has only had basic benefits in the past. Most ASO plans offer health insurance, dental insurance and short-term disability. Some plans may even offer long-term disability.

Related: FAQ: Employee Insurance Benefits


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