Administrative Services Only (ASO) is a arrangement in the realm of employee benefits and health insurance. In an ASO arrangement, an organization, typically an employer, self-funds its employee benefit plans while outsourcing the administrative services to a third-party administrator (TPA). This means that the employer takes on the financial risk for paying covered claims and assumes responsibility for funding the plan, while the TPA manages the day-to-day administrative tasks.

Key features of Administrative Services Only (ASO) arrangements include:

1. **Self-Funding:** The employer takes on the financial risk for the cost of employee benefits, including medical, dental, and sometimes other benefits. This is in contrast to a fully insured plan, where the employer pays a premium to an insurance company, and the insurer assumes the financial risk.

2. **Administrative Outsourcing:** The TPA is responsible for handling administrative functions such as claims processing, enrollment, billing, and customer service. The TPA may also provide access to a network of healthcare providers.

3. **Cost Control:** ASO arrangements provide employers with greater flexibility and control over their benefit plans. Employers can design and customize their plans based on the specific needs of their workforce.

4. **Transparency:** Because the employer is self-funding the plan, there is often greater transparency into the cost and utilization of healthcare services. Employers can analyze claims data to identify trends and make informed decisions about plan design and cost management.

5. **Stop-Loss Insurance:** To mitigate the financial risk associated with self-funding, employers often purchase stop-loss insurance. This insurance provides protection against catastrophic claims that exceed a certain threshold.

6. **Flexibility:** ASO arrangements offer flexibility in plan design and administration. Employers can tailor benefit plans to the unique needs of their workforce and make adjustments based on data and analysis.

ASO arrangements are commonly used by large employers who have the financial capacity and risk tolerance to self-fund their employee benefit plans. These arrangements can potentially result in cost savings for employers, especially if the claims experience is favorable. However, they also require careful management to ensure that the financial risks are adequately addressed.

It’s important for employers entering into ASO arrangements to work closely with their chosen third-party administrator to establish clear guidelines, understand the terms of the agreement, and put measures in place to control costs and manage risks effectively.