Understanding Administrative Services Only (ASO): Benefits and Advantages with an example

Administrative Services Only (ASO) is a business model where a company outsources the administration of employee benefits to a third-party vendor. The ASO provider is responsible for managing the administration of the benefit plan, while the company retains the responsibility for funding the plan and adhering to its terms.

One of the most common areas covered by an ASO provider is health benefits, specifically dental benefits, short-term disabilities, and long-term disabilities. However, ASO providers do not typically provide other health benefits, such as medical or vision insurance.

There are several advantages to using an ASO provider. The first is cost savings. Because ASO providers only handle the administration of benefits and not the actual benefits themselves, they are often much less expensive than full-service providers. This can be particularly beneficial for larger firms with many employees who have different needs.

Another advantage of ASO providers is flexibility. Because they are not tied to a specific set of benefits or plans, ASO providers can be more agile in their processes and operations. This can be particularly helpful for firms that want to design benefits that are tailored to their employees' specific needs and interests.

Finally, ASO providers can offer expertise and resources that may not be available to in-house HR teams. This can include access to advanced technology, data analysis tools, and specialized knowledge of benefit administration.

Advantages & Benefits:

1. Cost Savings: ASO providers are often significantly less expensive than full-service external providers, resulting in cost savings for the company.
2. Flexibility: ASO providers are more flexible in their processes and operations, which can be beneficial when designing employee benefits that are tailored to specific needs and interests.
3. Expertise and Resources: ASO providers offer specialized expertise and resources that may not be available to in-house HR teams, including access to advanced technology and data analysis tools.
4. Streamlined Administration: By outsourcing benefit plan administration to an ASO provider, companies can streamline administrative tasks such as processing claims and evaluating benefits.
5. Increased Efficiency: ASO providers can handle administrative tasks more efficiently than in-house HR teams, freeing up time and resources for other important tasks.
6. Reduced Risk: ASO providers assume some of the risk associated with benefit plan administration, which can reduce the risk for the company.
7. Scalability: ASO providers can scale their services to meet the needs of companies of all sizes, making them a suitable option for both small and large businesses.

Overall, Administrative Services Only (ASO) offers several benefits and advantages for companies that want to provide employee benefits without the added costs and administrative burdens of full-service providers.

Example:

To illustrate, let's say Company A has 500 employees and wants to provide dental, short-term disability, and long-term disability benefits. However, the company does not have the resources to manage the administration of these benefits in-house. Instead, Company A hires an ASO provider to handle the administrative tasks, such as processing claims and evaluating benefits. Company A retains the responsibility of funding the benefits plan and adhering to its terms. As a result, the company saves on administrative costs and gains access to specialized expertise and resources.