Administrative Services Only (ASO) - Definition & Meaning
What is Administrative Services Only (ASO)?
Administrative Services Only (ASO) is an arrangement where an organization funds its own employee benefit programs like healthcare, but hires a third party to deliver the specific administrative services to the employer. Organizations might not handle high benefit plans like Life and Disability on an independent basis, and thus, those can be effectively managed on various alternate funding bases.
However, the Employer is liable for all the financial and legal aspects of the benefit plan. The hired third party is called Third Party Administrator (TPA), which is being asked to pay claims on behalf of the employer.
ASO is generally an option for the large businesses who are willing to assume financial responsibility for the possibility of cost savings and who evaluate the risk tolerance for the plans.
Difference between Insured benefits and ASO:
The risk for benefits is shared among all plans in the insurer’s risk pool, while in ASO; the plan sponsor assumes the risk for the plan
Example:
US Companies are switching from their medical plans to ASO. The companies which opted to self-insure the medical benefits had to pay millions of dollars for medically complicated cases like chemotherapy and pregnancy when there was no limit on the coverage. Therefore, ASO plans are sold in US who need insurance companies to assume the risk and limit the claims to specified amount or percentage.
Hence, this concludes the definition of Administrative Services Only (ASO) along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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