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Blue Cross Blue Shield Plan Administrative Expenses Approximate 11% of Premiums, According to Sherlock Company

July 13, 2004

Philadelphia, July 13, 2004. The Sherlock Expense Evaluation Report (SEER), Blue Cross Blue Shield Plans Edition, shows that administrative expenses for Blue Plans' insured comprehensive products grew by less than 10% in 2003. Holding constant the universe of Blue Plans, cost per member per month declined three-tenths of a point to 10.8% of premium or equivalent.

Median PMPM costs for comprehensive products were $24.30, but were as low as $18.80 commercial POS sold on an ASO basis. Administrative expenses varied by insured product. Medicare Advantage had administrative expenses of 7.41 % of premium while insured commercial HMO averaged 15.23%.

Health plans participating in Sherlock Company's benchmarking studies include public, Blue Cross Blue Shield, provider-sponsored and Medicaid-oriented plans. The 18 Plans included in this study serve 27.9 million members or 31% of the membership served by Blue Cross Blue Shield Plans.

SEER reports are the definitive benchmarks for health plan administration. They are critical tools to enhance operational performance and support strategic initiatives ranging from management of the product portfolio, vendor negotiations, outsourcing and business combinations. Studies include separate universes of Publicly Traded health plans and Blue Cross Blue Shield Plans, and an additional one for Provider Sponsored Health Plans is currently underway. Volume I for each universe contains financial metrics and Volume II contains operational metrics.

Volume I of SEER of Blue Plans contains 2,474 analyses of ten principle product areas and forty six functional areas. Separate analyses include individual products, small group and national accounts, outsourced functions such as mental health, pharmacy and COB / Subrogation and information systems allocations. Products include HMO, Point-of-Service, Indemnity and PPO, Medicare Advantage, Medicaid HMO and Medicare Supplemental.

Volume II provides more than 1,000 operational analyses of eight key functional areas, including marketing, customer service, claims, enrollment and provider relations. Examples include average cost per inquiry, average speed of answer and the average cost, speed and accuracy of processed claims.

Additional details are available on our website or by contacting us at:

Douglas B. Sherlock, CFA
Sherlock Company

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