July 16, 2007
Philadelphia. July 16, 2007. Median administrative costs for selected Blue Cross Blue Shield Plans were $25.90 per member per month (PMPM) in 2006, according to Sherlock Company’s recently published performance benchmarks. This equated to 11.9% of premiums or equivalents.
The prior year’s median costs were $26.43. Declines in costs reflected increases in Plan participation, as 23 of the Plans participated, compared with 17 last year. Individual Plans also reported moderating administrative expense growth. Blue Cross Blue Shield Plans participating in this year’s performance benchmarking study comprised most of the 39 primary licensees of Blue Cross Blue Shield.
Administrative costs are segmented for the eleven most common products offered by Blue Cross Blue Shield Plans. These included all major commercial products plus Medicare Advantage, Medicare Part D, Medicare Supplemental, Medicaid and Stand-alone Dental. Among comprehensive health products, Medicare Advantage had the highest costs, at $59.87. But relative to premiums, Medicare Advantage was the lowest cost, at 8.1% of premiums.
Among insured commercial products, Indemnity and PPO reported the lowest costs at $28.98. ASO products, which comprised 48.2% of commercial membership, ran approximately $10.00 less, PMPM, due to mainly to lower marketing costs. Medical and Provider Management costs are more than $1.00 lower in Commercial Indemnity and PPO compared to HMO products.
“The long-term trend among health plans is closer scrutiny of administrative costs, and achieving best practices in operations management,” said Sherlock Company’s president, Douglas B. Sherlock, CFA. “Blue Cross Blue Shield Plans are motivated by consumer demand and increasingly possess the technological ability to both lower costs and enhance the performance of their operations.”
These results are drawn from Sherlock Company’s health plan performance benchmarks, or SEER. Benchmarks include thousands of operational and financial performance metrics and compile the results of approximately 50 health plans serving 35 million insured Americans. The results of the tenth annual studies include most of the Blue Cross Blue Shield Plans, Provider-sponsored Independent) plans, Medicare Oriented plans, Medicaid oriented plans and selected larger plans.