August 1, 2007
Philadelphia. August 1, 2007. The median administrative costs of independent, Provider-Sponsored health plans were $27.73 Per Member Per Month (PMPM) in 2006. This equated to 9.3% of premium equivalents, as reported in Sherlock Company's benchmarks.
The prior year’s median costs were $24.67. Because of differences in the universes the results are not directly comparable. However, the main variance resulted from Medicare and Medicaid. Commercial insured expenses were higher by 1.1% at $26.56 PMPM. Commercial ASO costs were 3.7% lower, $16.69. Commercial members are more than 80% of the total.
The twelve leading Provider-Sponsored Plans participating in this year’s study serve 3.5 million people in eleven states.
“Provider-Sponsored and other independent health plans are essential components of a competitive, consumer-friendly health insurance market. Many of the most successful Provider-Sponsored plans combine strategic separation and identification with well-known health systems, reminiscent of the best of the classic integrated delivery systems,” said Sherlock Company’s president, Douglas B. Sherlock, CFA.
Administrative costs are segmented into the ten most common products offered by Provider-Sponsored Plans. These include three major insured commercial products, ASO, four Medicare products and Medicaid. Medicare SNP had the highest costs, at $83.17. Relative to premiums, however, it had the lowest cost, at 5.2% of premiums.
Among insured commercial products, HMO reported the lowest costs at $27.52 PMPM. ASO products, which comprised 21% of commercial membership, cost nearly $10.00 less, due mainly to lower marketing costs. Interestingly, Medical and Provider Management costs, at $4.74, are $1.85 higher than Blue Cross Blue Shield Plans.
“Provider-sponsored health plans continue to focus on administrative expense control, and achieving best practices in operations management,” said Sherlock.
These results are excerpted 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 the leading Provider-Sponsored (Independent) Plans, most Blue Cross Blue Shield Plans, Medicare-Oriented plans, Medicaid-Oriented plans and Larger Plans.