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What is Administrative Services Only (ASO)?

Administrative Services Only (ASO) is a type of arrangement where an organization outsources certain administrative functions of its employee benefits plan to a third-party service provider. Under an ASO agreement, the employer retains the financial risk associated with the benefits plan while delegating the administrative tasks to the service provider.

In an ASO arrangement, the third-party administrator (TPA) typically handles various administrative functions, which may include:

1. Enrolling employees in the benefits plan.

2. Processing and paying claims for medical, dental, vision, and other benefits.

3. Providing customer service and support to plan participants.

4. Managing the eligibility and enrollment process.

5. Coordinating with healthcare providers and insurance carriers.

6. Handling billing and premium collection.

7. Analyzing and reporting on plan utilization and costs.

8. Assisting with compliance and regulatory requirements.

9. Managing employee communication and education regarding benefits.

ASO arrangements provide flexibility to employers, allowing them to customize their benefits plan design while outsourcing the administrative tasks to a specialized service provider. By engaging an ASO provider, employers can potentially reduce their administrative burden, gain access to expertise and technology, and focus on strategic aspects of their business.

However, it’s important to note that with ASO, the employer retains the financial risk associated with the benefits plan. This means that the employer is responsible for funding the claims and assumes the financial consequences of plan utilization. ASO arrangements are commonly used by larger organizations that have the resources and expertise to manage their benefits programs but seek administrative support from a third party.

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