Administrative Services Only (ASO) Plan

An Administrative Services Only (ASO) plan, refers to a specific arrangement for group benefits where the benefits provided under the plan are not insured by a traditional insurance policy. Instead, the plan sponsor, which is typically an employer, engages an external firm—often a life and health insurance company—to manage the administration of their plan. This includes tasks such as processing claims, handling plan member inquiries, and maintaining records. The key characteristic of an ASO plan is that the plan sponsor is directly responsible for providing the necessary funds to pay out claims, rather than paying premiums to an insurance company to assume this risk. This setup can offer cost savings and flexibility for the plan sponsor, particularly if the claims are lower than expected, but it also entails taking on the financial risk associated with paying those claims.