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Yes, both are self-funding options, but what is the better solution for your high healthcare costs? Let’s first review the definitions.

ASO (Administrative Services Only) – an arrangement in which a company funds its own employee benefit plan, such as a health insurance program while purchasing only administrative services from the insurer. This alternative funding option is a group health self-insurance program often used by large employers who opt to assume responsibility for all the risk, remaining exclusively liable for all financial and legal elements of the group benefits plan.

Independent TPA (Third Party Administrator) – is a business organization that performs administrative services for a health plan such as billing, plan design, claims processing, record keeping, and regulatory compliance activities.

There are 3 key reasons an Independent TPA is a better solution for your organization!

  1. Flexibility
  2. Transparency
  3. Cost Savings

Let’s dive in deeper!


An ASO model is a canned solution from a carrier that does not allow you to carve out anything. This is because you are tied to a single carrier so they will not compare rates to another insurer or customize your plan based on the demographics of your group. Overall, you are limited to the carriers’ providers and networks when using this model.

An independent TPA allows you to choose your PBM, stop loss carrier, cost containment solutions etc. They have the employers’ best interests in mind, they make an unobstructed advisement to the group based on their needs.

Flexibility and customization are a major benefit to self – funding so why self-fund if you cannot do this?


ASO’s are not able to capture the significant plan and member data available to them. This makes it extremely difficult for the ASO to integrate and implement cost containment solutions and wellness programs because they are unable to diagnose the problem in the first place. Again, hindering the groups’ ability to recognize the risk and provide a cost containment method.

An independent TPA focuses on data driven solutions, which can only be provided through claims transparency. This transparency then provides opportunity to solutions and programs that can fix this high cost.

Cost Savings

An ASO model has no incentive to lower your costs because that means their ASO commission decreases. They market savings through reimbursement at network rates (which is inflated originally) and rebates. However, the drugs they refer through the PBM is at the highest cost which than allows them to maximize rebates, this is not the best strategy. So, in regard to the above example, you make know the exact amount but its not the best price or the best solution.

An independent TPAs can offer more innovative reimbursement structures based on a percentage of Usual, Reasonable & Customary (UCR) or Cost+, which uses a negotiated percentage above Medicare reimbursement. Again, TPA’s also provide cost containment solutions, which is key to lowering the overhead cost. This does not even include the distributions that often come from your stop loss carrier.


Ex ASO model: Your group has high PBM costs in an ASO model; however, you cannot implement a Sharx program because of the lack of customization and unknown knowledge of prescription spend. So, you just sit and watch your cost increase.

Ex TPA model: Your group has high PBM costs in a TPA model. The TPA identifies the high-cost claim or prescription, implements Sharx or Southern Scripts, and reduces the overhead.

Overall, if you are looking at self – funding. Ask yourself if the solutions in front of you provide the above 3 rewards: Flexibility, Cost Containment, and Cost Savings. As you can see ASO is all the risk without any reward!

Please schedule a meeting with me for further information! – Eleanor Schroeder

Schedule a meeting with me.

Posted by in Employee Benefits, Health Equity, Health Insurance, Healthcare Spending, Learning and Development