Administrative Services Only (ASO)

One solution to manage costs and provide quality healthcare coverage to employees is to offer an Administrative Services Only (ASO) plan. 

What is Administrative Services Only (ASO) Plan?

Administrative Services Only (ASO) is a type of arrangement or plan where the company:

• Covers the expenses for the employee benefits (usually health insurances)
• Hires a third-party (typically, the insurance company) to handle the administrative tasks associated with employee benefits. 

Unlike traditional fully insured plans, where the insurer (insurance company) assumes both the financial risk and administrative duties, ASO plans allow employers greater flexibility and control over their benefits programs.

Administrative Services Only vs Traditional Administrator Arrangements 

Below are the main differences between traditional administrator arrangements and ASO plans:

• In traditional administrator arrangement, the insurance company handles the claims AND covers some of the costs of the claims. In ASO, the insurance company still handles the claims, however, the costs are fully covered by the employer. 
• Traditional administrator arrangement also means the insurance company decides on the yearly premium, and may adjust it the following year should expenses exceed expectations. In Administrative Service Only (ASO) Plans, there’s no fixed premium. As the employer pays for the coverage, they can track costs and adjust their plans accordingly. 
• If the costs are lower than expected, traditional administrator arrangement means the insurer keeps the surplus. However, in ASO, the employer keeps it and may reinvest as they find necessary. 

Generally, under an ASO arrangement, the employer retains the financial risk while outsourcing administrative tasks such as claims processing, enrollment, and customer service to a third-party. This distinction grants employers more autonomy in designing benefit packages tailored to their workforce's specific needs.

What Health Benefits Do Administrative Services Only Plans Support?

ASO plans typically cover a wide range of health benefits, including medical, dental, vision, prescription drug coverage, and sometimes even wellness programs. Employers can customise these benefits to align with their budgetary constraints and employees' preferences, offering a more personalised approach to healthcare coverage.

What Administrative Support Do Employers Outsource To A Third-Party?

Some of the administrative support employers outsource to a third-party include:

• Management of the policy, including reimbursement 
• Identifying the benefits that will be made available to the employees 
• Facilitating the enrolment process
• Facilitating the processing of claims
• Liaising with the employees throughout the process of claims 
• Assisting with the calculations of financial matters 
• Filing the necessary reports 

Benefits and Usage of ASO Plans 

ASO plans continue to gain traction because of the following benefits:

• Flexibility and cost-saving potential: Employers do not pay premiums based on predetermined rate schedules, potentially resulting in significant savings.
• Transparency and control: Employers have greater visibility into claims data, enabling identification of cost drivers and implementation of targeted cost containment strategies.
• Customisation: Employers can tailor benefit designs and provider networks to meet employees' unique needs, fostering greater satisfaction and engagement.
• Insights and wellness initiatives: ASO plans provide valuable insights into employees' healthcare utilisation patterns, enabling informed decision-making and proactive wellness initiatives.

Disadvantages and Risks of ASO Plans (And How They Can Be Mitigated)

Despite its benefits, there are still drawbacks and risks associated with Administrative Services Only (ASO) plans:

• Risk of large, unexpected claims: Employers can mitigate this risk by purchasing stop-loss insurance to protect against catastrophic losses beyond a certain threshold.
• Administrative oversight and expertise: ASO arrangements require robust internal controls and resources to monitor claims activity, detect fraudulent behaviour, and comply with regulatory requirements.
• Suitability for all employers: ASO plans may not be suitable for small or unstable employee populations lacking the financial resources and risk tolerance necessary to manage self-funded benefits effectively.

Administrative Services Only (ASO) plans offer employers a dynamic alternative to traditional fully insured arrangements, providing greater flexibility, cost-saving opportunities, and customization options. However, they also entail risks that require careful consideration and proactive risk management strategies.

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