What is it?
Administrative Services Only (ASO) is an arrangement where a company outsources the administration of its employee benefit programs, such as health insurance, to a third-party service provider. However, unlike traditional fully-insured plans, the company itself assumes the financial risk for claims. The ASO provider handles administrative tasks like claims processing, customer service, and managing employee benefits, but the employer funds the claims out of its own budget.
Why is it important?
- Cost Control: ASO arrangements allow companies to have more control over their healthcare spending because they pay only for the actual claims, potentially saving money compared to fully insured plans with fixed premiums.
- Customisation: Employers have more flexibility to design their benefits packages, tailoring them to meet the specific needs of their workforce.
- Transparency: Employers gain better insight into healthcare claims and usage patterns, allowing for more data-driven decisions regarding benefits offerings.
- Risk Management: Although the employer assumes the risk of claims, ASO plans often include stop-loss insurance to protect against unexpectedly high costs, which helps balance risk.
- Scalability for Larger Employers: ASO is often used by larger organisations that can better manage the risks associated with self-funding, offering a more scalable and flexible solution for employee benefits management.
