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Understanding ASO Health Plans

If you’re an employer looking for a way to control healthcare costs while still providing quality coverage to your employees, you may want to consider self-insured Administrative Services Only (ASO) health plans. While traditional insurance plans transfer the financial risk of healthcare expenses to insurance companies, ASOs provide employers with more control over the insurance claims and benefit administration process. In this article, we’ll explore the basics of ASO health plans and how they differ from traditional insurance plans.

What are ASO Health Plans?

ASO health plans are essentially self-insured plans that let employers fund their employees’ healthcare expenses directly. Instead of paying fixed premiums to insurance companies, employers are responsible for covering medical claims and other expenses. ASOs are often used by large organizations that have the financial resources and the ability to manage the complexities associated with healthcare costs.

How Do ASO Health Plans Differ From Traditional Insurance Plans?

While both ASO health plans and traditional insurance plans provide healthcare coverage to employees, there are some key differences between the two:

  • Control: With an ASO health plan, the employer has more control over the administration of healthcare benefits. This includes managing healthcare claims, negotiating rates with healthcare providers, and determining the scope of benefits.
  • Flexibility: ASOs are often structured in a way that allows for more flexibility in benefit design. Employers can customize benefits to fit the needs of their employees, rather than being limited to standard benefits packages offered by insurance carriers.
  • Savings: ASOs give employers more opportunities to save money on healthcare costs. While traditional health plans are often subject to rising premiums that are beyond an employer’s control, ASOs let employers avoid these increases by managing the plan’s administrative costs directly.

Employers can also benefit from a larger degree of transparency, as they have direct access to detailed claims data, which can help them identify cost-saving opportunities.

Overall, while implementing an ASO health plan requires some initial investment and management overhead, it can offer significant cost savings and benefits to the organization in the long run.

The Benefits of ASO Health Plans for Employers

When it comes to providing health insurance benefits for their employees, businesses typically have two basic options: self-insured plans or fully-insured plans. While fully-insured plans are more common, an increasing number of employers are turning to an alternative approach called Administrative Services Only (ASO) health plans. Below are some of the key benefits ASO health plans can provide to employers:

Cost Savings

ASO health plans can be a more cost-effective option for businesses that are willing to take on a higher degree of risk. With a fully-insured plan, an insurance company assumes all of the financial risk for paying out claims. But with an ASO plan, the employer bears a greater share of the risk, which can result in lower premiums. Additionally, ASO plans often allow employers to tailor the plan to the specific needs of their workforce, which can further drive down costs.


ASO health plans give employers much more control over their healthcare benefits. Unlike fully-insured plans, which come with pre-determined benefits and coverage options, ASO plans can be customized to meet the specific needs of an organization. For example, an employer might decide to exclude certain services that its employees are unlikely to use, or to offer high-deductible plans that are better suited to a generally healthy workforce. This flexibility can help employers save money while still providing high-quality healthcare benefits to their employees.

Greater Control

One of the main benefits of ASO health plans is that the employer retains control over plan design and administration. With a fully-insured plan, the insurance company makes the decisions about what benefits will be covered and how claims will be handled. But with an ASO plan, the employer can design the plan to fit the specific needs of its workforce, and can also decide which services will be covered and which providers will be included in the network. This level of control can help employers reduce costs and ensure that their employees have access to high-quality healthcare providers.

Enhanced Reporting

ASO health plans often provide greater visibility into healthcare utilization and spending patterns. Employers can use this data to identify areas where they can save money, as well as to track the effectiveness of wellness programs and other initiatives. Some ASO plans also come with reporting features that allow employers to monitor employee participation in health and wellness programs, which can help them target their efforts more effectively.

Improved Employee Engagement

By offering customized healthcare benefits that meet the specific needs of their workforce, employers can improve employee engagement and morale. Employees are more likely to appreciate benefits that are tailored to their individual needs, and are more likely to feel valued by their employer as a result. Additionally, by providing greater transparency into healthcare costs and utilization, employers can help employees make more informed decisions about their healthcare.

ASO health plans can provide significant benefits for employers, including cost savings, greater flexibility, and enhanced control over their healthcare benefits. While there are some potential risks associated with ASO plans, many employers find that the rewards are worth the effort. By working with a reputable benefits consultant and taking the time to design a plan that meets the specific needs of their workforce, businesses can offer high-quality healthcare benefits that are both cost-effective and attractive to employees.

Organizations Suited for ASO Health Plans

ASO health plans or Administrative Services Only plans are a popular option for organizations looking to self-fund their employee benefits. Compared to traditional fully-insured health plans, ASO plans offer more flexibility and cost savings. However, ASO plans are not for everyone. In this section, we will discuss factors that employers should consider when deciding whether an ASO health plan is right for their organization.

What is an ASO Health Plan?

Before we dive deeper into this topic, let’s first understand what an ASO health plan is. An ASO plan is a type of self-funded health insurance plan where the employer takes on the financial risk of covering employees’ healthcare expenses. Although ASO plans work similarly to fully-insured plans, there are a few key differences.

With an ASO plan, the employer contracts with a third-party administrator (TPA) to handle various administrative services such as claims processing, customer service, and provider networks. The TPA charges the employer a fee to perform these services, but the employer retains control over the plan design and funding.

Organizations Best Suited for ASO Health Plans

While ASO health plans can be a cost-effective option and provide more control for employers, they may not be the best choice for every organization. Here are some factors to consider before opting for an ASO plan:

Size of the Company

ASO plans are generally a better fit for mid-sized to large employers with more than 100 employees. Smaller employers may find it challenging to manage the financial risk associated with self-funded plans.

Cash Flow

ASO plans require more financial responsibility on the part of the employer. As the sponsor of the plan, the employer is responsible for paying the claims of employees. Organizations with reliable cash flow may have an easier time managing the risks associated with ASO plans.

Claims History

When considering an ASO plan, organizations should review their claims history. ASO plans work better for organizations with relatively stable claims. Companies with high claims costs or unpredictable claims may struggle to budget for health care expenses.

Industry Type

Certain industries, such as manufacturing or construction, may have higher risks of on-the-job injuries or illnesses. As a result, they may have higher health care costs. For these types of companies, ASO plans can be an excellent way to save on health care expenses by taking on the financial risk.

Risk Tolerance

ASO plans are self-funded plans, which means they come with more financial risk for the employer. Companies that are risk-averse may prefer traditional fully-insured plans. Companies that are comfortable taking on more risk may choose ASO plans.

ASO health plans can be a cost-effective and flexible option for organizations looking to self-fund their employee benefits. However, they are not suitable for all organizations. Companies considering an ASO plan should evaluate their cash flow, claims history, industry type, and risk tolerance before making a decision.

How to Set up and Administer an ASO Health Plan

ASO health plans are becoming increasingly popular with employers looking for more control over their healthcare costs. However, setting up and administering an ASO health plan can be a complex process, and there are several factors to consider before getting started. In this section, we will discuss the key steps involved in setting up and administering an ASO health plan, including tips for managing claims, billing, and employee communications.

Determine Your Needs and Objectives

The first step in setting up an ASO health plan is to determine your organization’s needs and objectives. This will involve assessing your current healthcare costs, identifying any pain points or areas for improvement, and setting clear goals for your ASO health plan. For example, you may be looking to reduce overall healthcare costs, improve employee health outcomes, or offer more flexible benefits options to your employees.

Choose Your Service Providers

Once you have determined your needs and objectives, the next step is to choose your service providers. This will typically involve selecting a third-party administrator (TPA) to manage your ASO health plan, as well as any other vendors such as pharmacy benefit managers (PBMs) or healthcare analytics providers. When selecting service providers, be sure to carefully evaluate their capabilities, experience, and track record, and look for providers who have experience working with organizations similar to yours.

Establish Your Plan Design

With your service providers in place, the next step is to establish your plan design. This will involve determining the specific benefits and coverage levels that you will offer to your employees, as well as any plan limits or cost-sharing arrangements. When establishing your plan design, be sure to take into account any compliance requirements under state and federal laws, as well as any industry-standard best practices.

Develop Your Claims Administration Strategy

The claims administration process is a critical component of any ASO health plan, as it will determine how claims are processed and paid out to healthcare providers. To develop your claims administration strategy, you will need to work closely with your TPA to establish a claims review and payment process that is efficient, accurate, and compliant with all regulations.

Implement a Billing and Reconciliation System

Billing and reconciliation can be one of the most challenging aspects of managing an ASO health plan, particularly if you are working with multiple healthcare providers and service vendors. To streamline the billing and reconciliation process, consider implementing a centralized billing and payment system that integrates with your TPA’s claims administration platform.

Communicate Your Plan to Employees

It is important to effectively communicate your ASO health plan to your employees. This will involve developing clear and concise plan materials, holding informational meetings and webinars, and providing ongoing communication and support to employees throughout the year. Investing in employee education and engagement can help ensure that your ASO health plan is successful in achieving your organization’s healthcare goals and objectives.

Setting up and administering an ASO health plan can be a complex and challenging process. However, by following these key steps and working closely with experienced service providers, you can successfully navigate the process and achieve significant cost savings, improved health outcomes, and greater flexibility and control over your organization’s healthcare benefits.

Real-World Examples of Successful ASO Health Plans

When it comes to choosing a health plan option, employers have a lot to consider. One option that is growing in popularity is the ASO health plan. While it may not be right for every organization, many employers have found success with this type of plan. Here are a few real-world examples of organizations that have implemented ASO health plans and what they learned along the way.

Example 1: XYZ Corporation

XYZ Corporation is a mid-sized manufacturing company with around 250 employees. They were struggling to provide affordable health insurance to their workforce, and many employees were opting out of coverage due to high out-of-pocket costs. After reviewing their options, they decided to switch to an ASO health plan.

The transition was not without its challenges. XYZ Corporation had to invest in new technology to manage claims and billing, and there was a learning curve for HR staff and employees alike. However, within a few months, they started to see cost savings. By having more control over their plan design and administration, they were able to negotiate better rates with providers and offer a broader network of physicians.

Employees also appreciated the flexibility of the ASO plan. They were able to choose from various deductibles and copays, and there were fewer restrictions on certain services. The overall satisfaction rate increased, and there was a significant reduction in absenteeism due to health-related issues.

Example 2: ABC Non-Profit

ABC Non-Profit is a small organization with fewer than 50 employees. They were struggling to provide health insurance at all due to the high costs associated with fully-insured plans. After some research, they decided to explore an ASO health plan option.

While there were some initial concerns about the financial exposure the organization would face, ABC Non-Profit was able to mitigate this by setting up a health savings account (HSA) for employees to contribute to. They also worked with a third-party administrator (TPA) to manage claims and billing.

Overall, the ASO health plan has been a success for ABC Non-Profit. They have been able to attract and retain high-quality employees, and there has been a noticeable decrease in employee turnover. The cost savings have enabled them to reinvest in other areas of the organization, such as employee training and development.

Example 3: LMN Startup

LMN Startup is a new company with only a handful of employees. They wanted to provide health insurance from the start but were concerned about the high costs associated with traditional plans. After some research, they opted for an ASO health plan.

The transition was straightforward for LMN Startup, as there were no legacy systems to deal with. They opted for a high-deductible plan with a health savings account (HSA) option, which was well-received by employees. They worked with a TPA to manage claims and billing.

LMN Startup has found the ASO health plan to be an excellent fit for their needs. They appreciate the flexibility and control that comes with the plan, and they have been able to provide affordable coverage to their employees. They also see it as a differentiator in their industry, as many startups do not offer health insurance at all.

Lessons Learned

These are just a few examples of organizations that have implemented ASO health plans successfully. There are, of course, many other factors to consider, and it is essential to do thorough research and consult with experts before making the switch. However, some common lessons can be drawn from these real-world examples:

  • Communication is key. Employees need to understand how the new plan works and what their options are. Communication should be ongoing throughout the process.
  • Work with a trusted TPA or broker. A third-party administrator or broker can help with plan design, claims processing, and other administrative tasks. Find a partner you can trust.
  • Embrace the learning curve. There will be some challenges associated with implementing a new plan, but they can be overcome with the right mindset and approach.
  • Plan for the long-term. ASO health plans are not a quick fix but rather a long-term strategy that requires ongoing attention and management. Make sure you have the resources and capacity to see it through.

ASO health plans can be an excellent option for employers looking to offer affordable, flexible health insurance to their employees. By working with experts, communicating effectively, and embracing the learning curve, organizations can successfully implement this type of plan and see significant cost savings and employee satisfaction in return.


In conclusion, ASO health plans offer a flexible and cost-effective option for employers who want to offer their employees health benefits while maintaining control over their healthcare spending. While traditional health insurance plans may work for some organizations, ASO plans are ideal for those that value cost savings and are comfortable taking on some risk. Employers must consider factors such as the size of their organization, employee demographics, and healthcare needs when deciding if ASO is the right option for them.

Setting up and administering an ASO health plan may seem daunting at first, but with the right tools and resources in place, employers can successfully manage claims, billing, and employee communications. Likewise, employers must keep in mind the compliance issues and financial exposure that come with an ASO plan. Still, these potential challenges can be mitigated with careful planning and adherence to regulatory requirements.

Further, real-world examples have shown that ASO health plans can work for a wide range of organizations, from small businesses to larger corporations. Enterprises that have successfully implemented ASO plans have learned that clear communication with their employees and ongoing evaluation of the plan’s effectiveness are essential to its continued success.

Overall, ASO health plans provide a viable alternative to traditional health insurance options for employers who want more control over their healthcare spending. Although there may be some challenges, the potential benefits, including cost savings and flexibility, make it worth considering for organizations of all sizes. Employers must take the time to carefully evaluate their healthcare needs and communicate effectively with their employees to make the transition to an ASO plan as smooth as possible.