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Blue Cross Blue Shield Administrative Cost Trends Decline in 2007

July 16, 2008

Philadelphia. July 16, 2008.  Per member administrative cost growth declined from 6.1% in 2006 to 4.3% in 2007. Adjusted to eliminate the effect of a shift in product mix, administrative expense growth declined from 6.5% in 2006 to 2.5% in 2007. Administrative expenses were 10.4% of premium equivalents in 2007.  Plans reported total administrative expenses of $25.36.  All cited values exclude investment and non-operating income and expense, income taxes and miscellaneous business taxes.

These results are excerpted from the Sherlock Expense Evaluation Report, a benchmarking study comprising the results of 23 Blue Cross Blue Shield Plans surveyed by Sherlock Company. More than 90% of participants did so in the prior year’s survey and nearly 80% have five or more years of experience participating in our benchmarks.

Sherlock benchmarks include thousands of operational and financial performance metrics. Besides Blue Plans, other universes include Independent / Provider-Sponsored plans, Medicare Advantage plans, Medicaid plans and Larger plans. Collectively the 46 plans serve approximately 36 million insured Americans.

The growth in administrative expenses ranged from a high of 10.0% for Medical and Provider Services to a low of 0.2% for Corporate Services. Douglas B. Sherlock, CFA, Sherlock Company’s president noted that, “The increasing emphasis of these Plans on Medicare Advantage had a profound effect on their expense trends. After holding constant the product mix, Corporate Services costs per member declined by 6.2% and Provider and Medical Management costs increased by 2.2%.”

Additional information is available in the Sherlock Expense Evaluation Report. We have also published a summary in July 2008 edition of the Plan Management Navigator accessible at www.sherlockco.com/docs/navigator/navigator-08-06.pdf.

We will host a conference call on Thursday July 17 from 2:00 PM to 3:00 PM East Coast Time to discuss the summary results. Doug Sherlock will offer a brief presentation, followed by questions and answers. To participate in the conference call, at the time of the call, please do the following:

 1. Dial number: 1-800-704-9804

 2. Enter conference code: 753349#

 

Sherlock Company (www.sherlockco.com), based in Gwynedd, Pennsylvania, provides informed solutions for health plan financial management. Since its founding in 1987, Sherlock Company has been known for its impartiality and technical competence in service to its clients.

Contact:
Douglas B. Sherlock, CFA
Sherlock Company
215-628-2289
sherlock@sherlockco.com
www.sherlockco.com

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