TPA vs ASO: two ways to run a self-funded plan

Updated October 21, 2026

ASO, or administrative services only, is an arrangement in which an insurance carrier administers a self-funded health plan, usually on its own provider network, while the employer pays the claims and keeps the risk. An independent TPA does the same administrative job without being part of an insurer, so the network, stop-loss coverage and pharmacy benefits can come from separate vendors the employer chooses.

Both are ways to administer a self-funded plan. Neither one insures it. If you are new to the terms, start with what a TPA is.

What does ASO mean?

ASO means the carrier provides administration only and does not insure the plan’s claims. A federal report to Congress describes insurers handling self-insured plans through an Administrative Services Only (ASO) contract, and federal guidance calls a carrier in this role an issuer acting as a TPA.

The employer stays at risk. A self-insured employer bears the risk associated with year-to-year swings in health spending and can buy stop-loss insurance to limit it, whoever administers the plan.

Insurers are a large part of this market. KFF reports that sponsors of self-funded plans typically contract with a third-party administrator or insurer for administrative services, and some of the largest insurers provide TPA services for a large share of self-insured employers.

A few practical points follow from the carrier running the plan:

• Familiar claims rules. Insurers told researchers for a federal study that they apply no different rules for initial claim decisions to ASO business than to fully insured business.
• An existing network. Insurers already have the infrastructure and provider networks in place to run a health plan.
• Different licensing. Under the NAIC model TPA law, licensed insurers operating as TPAs are exempt from the act’s requirements outside workers’ compensation.

What does an independent TPA do differently?

An independent TPA administers the plan without an insurer’s network, pharmacy program or stop-loss policy attached, so each of those pieces is chosen separately. That is where both its flexibility and its extra work come from.

Rented networks and other ways to price claims

An independent TPA gives the plan access to providers in one of several ways. TPAs create provider networks and negotiate payment rates, and plans can also rent a network another company built. One county asked TPA bidders whether any part of the medical network is leased and what network access fees would apply.

For claims outside the network, it is common for TPAs to use repricers. Some plans skip a traditional network and pay with reference-based pricing instead. You can browse TPAs that offer network access or TPAs that offer reference-based pricing.

Carve-outs, such as a separate PBM

A carve-out means a benefit is run by a separate vendor instead of the main administrator. For self-insured plans, DOL notes that the plan may engage a PBM directly or get pharmacy benefit services through a TPA or other entity, and it says larger self-insured plans are likely to contract with PBMs directly.

Public bids show both approaches. One county reserved the right to carve out PBM services from the medical plan administrator. Another listed importing prescription drug claim data from the PBM, if different than the TPA, as a required TPA service. Carriers can bundle pharmacy into ASO, and one county asked ASO bidders to state whether they own or manage the PBM or contract with one. See TPAs that list pharmacy benefits.

Choice of stop-loss carrier

With an independent TPA, the employer picks its stop-loss carrier, and the TPA exchanges data with it. One county allowed stop-loss to come from the TPA or as a stand-alone quote, provided the stop-loss carrier pays for the data exchange with the TPA. Another required ASO bidders to include stop-loss and said it would not consider proposals with subcontracted stop-loss.

Stop-loss is common in self-funded plans. At firms with 200 or more workers, 75% of covered workers in self-funded plans are in plans with stop-loss coverage. See TPAs that coordinate stop-loss.

How do ASO and an independent TPA compare?

The main differences are who supplies the network, pharmacy and stop-loss, and how the fees are packaged.

On data, the law is the same for both. A plan may not agree to terms that block it from electronically accessing de-identified claims and encounter data. Even so, stakeholders told DOL that plan fiduciaries may not have access to all claims data, provider payments and pricing data held by TPAs and insurers. Ask either kind of administrator what exports you will receive.

On pricing, administrative fees are usually quoted per employee per month. Network access fees can be charged through claim charges or through plan administrative fees, so compare totals rather than headline rates. Carriers can rent networks too: one county asked ASO bidders whether an out-of-area network was owned by the bidder or rented or leased, and how its fee is collected. The guide to what a TPA costs explains common fee types.

Are there carrier-owned TPAs?

Yes. Some TPAs are owned by insurance companies, which puts them between the two models. An analysis published by Georgetown’s Center on Health Insurance Reforms describes TPAs owned by large insurance companies and note that those insurers increasingly own physician groups and hospitals, which raises questions about steering patients to affiliated providers.

An earlier analysis from the same center found that an insurer acting as a TPA can have interests that may not align with those of its employer clients. That does not make carrier ownership good or bad, but it is worth asking any administrator which network, PBM and stop-loss products are affiliated with it.

The directory flags ownership, so you can compare carrier-owned TPAs with independent TPAs.

How do you decide between ASO and an independent TPA?

Decide by putting both models through the same request and comparing total cost, network fit and how much control you want. DOL says hiring a service provider is a fiduciary function and tells sponsors to give each bidder complete and identical information.

Questions that separate the two:

1. Where do your members get care? Ask each bidder whether its network is owned or leased and what share of it is leased.
2. Do you want to carve out pharmacy? If you want your own PBM contract, confirm the administrator will work with it and share data.
3. How will you buy stop-loss? Decide whether you want it bundled or bought separately, and who pays for data exchange.
4. What is the total cost? DOL suggests you compare all services with the total cost for each provider, since some quote bundled fees and others charge separately.
5. How easy is it to change later? A federal report lists the ease of changing a TPA or stop-loss insurer without changing employees’ choice of providers as one advantage of self-insurance. If a change would also move the network, members may need new providers; see switching TPAs.

DOL also says to document the selection process, so keep a record of how you compared bids and why you chose one. For a fuller list of questions, see how to choose a TPA.