only administrative services (aso)
Administrative Services Only (ASO) is an arrangement in which a company finances its own employee benefit plan, such as a health insurance program, while purchasing only administrative services from the insurer. This alternative financing option is a group health self-insurance program typically used by large employers who choose to take responsibility for all of the risk, being solely responsible for all financial and legal elements of the group benefit plan.
administrative services available in aso plan
In a partnership agreement, employers purchase specific administrative services from a third party administration (tpa) for the tpa to perform. Typical services offered in such a situation may include:
Reading: What does aso stand for in insurance
- preparation of the administration manual.
- administration of cobra, hra, hsa, fsa and similar.
- communicating with employees.
- manage benefit enrollment.
- determine benefits.
- evaluate claims.
- claims processing.
- payment of benefits.
- prepare government reports.
- prepare summary plan descriptions.
- perform accounting matters.
Essentially a self-funded plan, it usually offers an arrangement for short-term disability, extended medical and dental benefits, and sometimes long-term disability benefits. employers rarely provide life insurance under an aso system due to the large amounts of coverage.
protect yourself in an aso arrangement
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In an aso agreement, employers purchase loss limitation insurance to protect themselves from any catastrophic loss should their employees’ insurance needs become exorbitant due to serious illness or injury. The last thing you want is to be locked into the unlimited financial responsibility of ASo plans.
Loss limitation insurance involves the payment of a premium to the insurer in which claims in excess of the loss limitation level (often set at $10,000 per insured employee) become the responsibility of the insurer.
A plan’s self-funded status is not changed by stop-loss insurance. It is necessary to have an insurance plan for your insurance plan, if you want it, especially to cover expenses such as expensive prescription drugs. Without loss limitation insurance, the financial impact on your business in the event of a major loss could be disastrous.
why choose aso for your company
Group health insurance benefits don’t manage themselves. No matter how large a company is, you may not want to handle all insurance matters in-house. Outsourcing your plan administration saves your HR team from enduring a learning curve and dealing with potentially confusing and detailed insurance issues where mistakes can easily be made and cost your company. In short, it also saves your company time and money.
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Smaller businesses, if financially feasible, can also benefit from an aso arrangement, especially start-ups and small businesses not prepared to handle the complicated legal and administrative details of group health insurance and benefits.
Under an ASO contract, employers pay a fee to a TPA to handle claims processing, organize provider networks, and manage other health plan logistics. these tasks in the hands of someone outside of your company also eliminates the need for you to hire a dedicated group health insurance employee and eliminates the need to pay another salary and full benefits.
Companies have more say in how their group health insurance benefits work under an ASO plan. In this arrangement, the employer controls your cash flow and only pays claims as they are incurred.
Learn more about partnership arrangements and whether one is right for your corporation and your employees. Speak to a knowledgeable benefits group representative today.
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