Administrative Services Only (ASO or Administrative Only) is a type of benefit plan in which a company contracts with an outside third-party provider to manage its employee-related benefits. Instead of purchasing an insurance policy, the company is responsible for funding the benefits and managing the program. With an ASO plan, the employer retains ownership and control of the plan and its decisions, which gives them a wide range of flexibility when it comes to benefits design and cost.

An ASO plan can provide a number of benefits for employers, such as the ability to set their own eligibility criteria, control benefit level and cost, manage their plan without the interference of an insurance carrier, and modify the plan more quickly and easily. Employers may also be able to more effectively manage their cashflow, as they can choose how to structure the plan’s annual premiums.

ASO plans are generally self-funded, meaning that the company is responsible for funding the benefit plan and managing any claims, as well as managing their own risk. The company’s risk is reliant on the claims experience of the workforce, so employers may also choose to set up a stop-loss arrangement to cover the risk of costly claims. 

ASO plans are most common among large organizations, such as large corporations and institutions, as the ability to control their benefit design, cost and risk could be seen as worth the increased administrative burden and reliance on the employer’s internal resources. Furthermore, ASO plans are also an attractive option for companies with an established, stable work environment with a consistent workforce, since a dedicated and loyal workforce is more likely to produce more favorable claims results.

In conclusion, ASO plans can offer a number of benefits for larger organizations that are willing to take on the responsibility of funding, running and managing their benefits plan. By outsourcing their payroll, workers’ compensation, health benefits, and human resources functions, employers are able to customize their benefits plan and better control their risk. Perhaps most importantly, an ASO plan allows employers to become self-sufficient and retain control over their health plan decisions and costs.