Administrative Services Only is an arrangement whereby the benefits carrier agrees to provide full administration and claim adjudication services to an employer but bears no liability arising from claims against those services. The employer self-insures the cost of providing the health and dental benefits.
Administrative Services Only arrangement is most often chosen where annual aggregate claims can be reliably estimated and the employer has the financial resources to assume the risk that claims will be higher than expected. Therefore, it is most suitable for large employers. By choosing an Administrative Services Only arrangement, the employer hopes to achieve economies of scale by outsourcing the administrative function while retaining the financial benefits of good claims experience.
The employer also benefits from the benefit carrier's claims management, thereby controlling claim costs which comprise the most significant portion of overall benefits costs.