Also known as: ASO · a/s/o · administrative services only arrangement
An arrangement where an employer self-funds its benefit plan but pays a third party only to administer it.
Administrative Services Only (ASO) is an arrangement in which an employer funds its own employee benefit plan (most often a health plan) from company money, but hires a third party, often an insurance company or a third-party administrator, to handle the administration: processing claims, paperwork, and member services. The key point is that under ASO the administrator does not take on the insurance risk; the employer pays the actual claims. It contrasts with a fully insured plan, where the employer pays fixed premiums and the insurer bears the claims risk. ASO becomes relevant as a startup grows large enough to consider self-funding benefits.
ASO is an arrangement where an employer self-funds its benefit plan (pays claims from its own money) but contracts a third party to administer it, handling claims processing and paperwork. The administrator provides services only and does not take on the insurance risk.
Under a fully insured plan, the employer pays fixed premiums and the insurer bears the risk of claims. Under ASO, the employer bears the claims risk and pays a third party only to administer the plan. ASO can save money if claims are low but exposes the employer to higher costs in a bad year.
Definitions are educational and may be modified by your specific policy language, endorsements, and state rules. For regulatory guidance, refer to the California Department of Insurance or the NAIC.
Last updated: July 2026.