For the second year in a row Blue Cross Blue Shield Plans posted a sharp decline in PMPM expense growth, to 4.0% in 2024 from 5.6% in 2023. This was masked by a change in product mix favoring more expensive products, so without adjusting for product mix, cost growth appeared to accelerate to 6.6% from 5.9%.
Trends are based on the results of the 13 continuously participating Plans (of 14 total) in the Sherlock Benchmarks. The constant mix growth in in Account and Membership Administration (representing over 40% of all expenses) was 4.2%, down from 5.2%% in 2023. This was also the second consecutive year of decline, paralleling the growth in constant mix Total Administration expenses.
Figure 1 shows a sharp decline in Total Administration since 2022, itself a sharp increase from 2021. Growth in 2021 was sharply lower possibly related to the effects of Covid. Notably, the growth in constant mix expense in 2024 approximates the averages for both Total and Account and Membership Administration over the past 10 years, after having eliminated the effects of product mix differences between every two comparison years.
This Plan Management Navigator summarizes several themes other than the decline in the rate of growth. The effect of product mix changes favoring higher cost-to-administer products created significant upward pressure on ostensible cost growth. Also, growth in Medical and Provider Management functions of Medical Management and Provider Network accelerated, as did Customer Services. While changes in 16 function trends were split, all Sales and Marketing trends declined, as did Information Systems and the Corporate Services functions. Staffing ratios, compensation and outsourcing all increased.
The source of the data used in this analysis is Sherlock Company surveys of fourteen Blue Cross Blue Shield Plans. They collectively serve 43.3 million members with Comprehensive products, approximately 40% of all comprehensive members of Blue Cross Blue Shield Plans. This is also 61% of all Blue members of not served by public Blue companies. Participating Plans also served 10.0 million people through “Host” relationships with other Plans, plus 7.9 million people through stand-alone dental products.
Trends and Product Mix Changes
Figure 2 shows median year-over-year trends in total administrative expenses and in each cluster of expense. In all cases, trends are shown solely from continuously participating Plans, and all trends are of costs per member per month. The “as reported” values are trends in PMPM costs. “Constant mix” values are also trends in costs but, in calculating growth, prior year product costs are reweighted to match this year’s product mix.
While as reported Total expenses accelerated, constant mix declined. Developed later, that difference reflected the effect of sharp growth in Medicare Advantage and decline in Medicaid. Including the effect of Pharmacy and Behavioral Health, per member constant mix administrative costs increased by 4.0% as against 6.6% as reported. We consider constant mix growth to be a more reliable way of looking at expense trends.
While constant mix Medical and Provider Management surged, the rate of growth in Account and Membership Administration declined, and grew at a rate similar to the Total. There were sharp declines in growth for both Sales and Marketing and Corporate Services clusters on this basis.
Total expense growth was higher on an as reported basis, 6.6% versus 5.9%. However, Medical and Provider Management was the only cluster to have accelerated between the periods. Its growth was nearly double its five-year trend. The decline in Corporate Services was steep. Growth in Sales and Marketing and Account and Membership Administration declined moderately.
Blue Plans’ relationship with seniors continues to evolve. Among all Plans surveyed, approximately 14.4% of all Blue Cross Blue Shield revenues in our universe was Medicare Advantage, up from 13.8% in 2023. The proportions for Plans’ Medicare Supplement is 3.2% versus 3.6% in 2023.
Cost Trends Holding Product Mix Constant
In our view, trends that have the same Plans in both comparison years and exclude mix changes are a more accurate representation of real trends in administrative costs. So the trend discussion in this Navigator is largely based on this approach. As noted earlier, the change in administrative expenses in 2024 was lower than in 2023. All clusters except Medical and Provider Management decelerated, shown in Figure 2. Key functions that contributed to expense growth were External Broker Commissions, Medical Management / Quality Assurance / Wellness, Information Systems Expenses and Customer Services.
MEDICAL AND PROVIDER MANAGEMENT
The Medical and Provider Management cluster increased faster than any cluster, by 9.1% PMPM on a constant mix basis. In Medical and Provider Management, the fastest growing among the clusters, Medical Management / Quality Assurance / Wellness grew much faster than did Provider Network Management and Services. Outsourcing increased in this cluster.
Because of its faster growth and larger size, the Medical Management function was responsible for over three times the change in Medical and Provider Management than the Provider Network function. Among all health plan functions, Medical Management was a close second to Broker Commissions in its contribution to expense growth. Medical Management growth was associated with a sharp increase in its staffing. Outsourced FTEs increased as a share of the total by 4.1 percentage points. The fastest growing subfunctions were Health and Wellness, Medical Informatics and Other Medical Management; each grew at a double digit pace. Staffing ratios increased in each of these areas. Other Medical Management is where medical directors are classified. Compensation in this subfunction increased sharply. While its staffing ratio increased by 13.9%, compensation grew by 7.9%.
The Provider Network Management and Services costs grew less rapidly than Medical Management, with fastest growth in the Other Provider Network Management and Services subfunction. This subfunction is concerned with provider report cards, newsletters, in-service and other activities related to the maintenance of the provider network.
ACCOUNT AND MEMBERSHIP ADMINISTRATION
Among clusters, the most important source of expense growth was Account and Membership Administration, responsible for more than one-half the increase in PMPM costs. Account and Membership Administration was the second fastest growing cluster of expenses. Costs increased in this cluster by 4.2%.
Information Systems growth comprised the largest share of the increase in this cluster but had the lowest rate of change. Its growth rate was lower than five year trend. The subfunction Pre-Planning Project Costs declined. Operations and Support and Applications Amortization and Licensing Expenses were more rapid than trend for the function. Benefit Configuration was the fastest growing subfunction. The staffing ratio increased by 2.6% as compensation increased by 6.6%. Outsourcing increased by 1.1 percentage points.
Customer Services was narrowly less than IS as a contributor to the increase in this cluster. It is the third smallest expense in its cluster, and was near double-digit in its growth. It continued the pattern since 2021 of being the fastest growing function in the cluster. Both compensation and staffing ratios increased. Customer Services had a 7.2% increase in Staffing Ratio and a 13.6% increase in Staffing Costs per FTE. Outsourcing was essentially unchanged as non-labor costs per FTE declined.
Claim and Encounter Capture and Adjudication growth approximated that of the cluster, but was below its five year trend. Enrollment / Membership / Billing grew at mid single-digit rates, relatively rapidly compared with the last five years.
SALES AND MARKETING
Sales and Marketing grew modestly, at 2.8%, as two of the five functions had declines in per Member Expenses. Marketing Expenses declined in mid-single digits; the five year average growth is less than 1%. Advertising and Promotion also declined at a mid-single-digit rate.
Rating and Underwriting increased by less than one percent on a constant mix basis. However, Risk Adjustment was among the fastest growing functions or subfunctions and, while per FTE compensation declined, staffing ratios increased sharply in that subfunction. Notably, this is on a constant mix basis so that it is in addition to the effect of the increasing share of Plan product portfolios attributable to Medicare Advantage.
Sales and External Broker Commission grew at the same pace, and the later was responsible for all and more of the growth of the cluster. Broker Commissions was the single most important source of increase among health plan functions.
Compensation and staffing ratios increased in all functions, except for Broker Commissions which has no staff.
CORPORATE SERVICES CLUSTER
Growth in the Corporate Services cluster was, at 1.2%, the slowest growing. The modest growth in Corporate Services is explained by the slight decline in PMPM costs for the Corporate Services Function. It is twice the size of the second largest function in this cluster. This function’s growth was well below its five year trend. The OPEB and Printing and Mailroom subfunctions had notable declines.
Finance and Accounting and Corporate Executive growth accelerated; both had double digit increases in staffing ratios. Compensation was lower for Corporate Executive. Non-Labor costs, which can be Strategic Expenses, appeared to grow sharply. Actuarial also accelerated. The tiny function of Association Dues and License / Filing Fees grew at essentially the same rate as the prior year.
For this presentation of the results of the Sherlock Benchmarks, trends in administrative expense trends in Behavioral Health and Pharmacy Benefits are included. Behavioral Health and Pharmacy (sometimes outsourced by benefit plan sponsors or the Plans themselves), which had the effect of slightly diminishing median Plan growth in the Account and Membership Administration cluster. The effect of these services on Total Cost trends went the opposite direction, also slightly. The apparently contradictory effects stem from using medians, and the median organizations may differ between the Account and Membership Administration and the Total.
In considering the components of administrative cost increase, we cite only functions that show unambiguous trends, reflecting key measures of central tendencies. Others we do not consider to be reliably determined for a sense of trend. Also, we are reporting median values throughout which has the limitation and virtue of excluding outliers. Finally, it should be noted that each of these Plans operates with a different management approach depending in part on their individual market circumstances. For instance, one Plan may choose to achieve the same efficiencies through Provider Contracting as another achieves using Medical Management so the trends described in measures of central tendency may not capture this nuance.
Growth and Product Mix
The effect of the change in mix among the continuously participating Plans was the typical member served became more expensive to administer, leading to higher growth in administrative expenses on an as reported basis than on a constant mix basis. In particular, the expensive to administer Medicare Advantage segment increased as Medicaid declined.
The continuing Blue Cross Blue Shield participants changed product emphasis between 2023 and 2024 through differences in product growth. However there was variability. For instance, the median comprehensive membership change was a decline of 0.8% while the mean growth was 3.7%.
Commercial membership dominates the product portfolio of Blue Cross Blue Shield Plans with a 2024 median mix of 78.9%. Self-insurance was the greatest choice among Blue customers with ASO/ASC at a median of 48.2% of total membership and insured at 28.7%. Indemnity and PPO comprised approximately 94% of the ASO/ASC products and approximately 82% of the members using commercial insured products. (Other products are HMO and POS.) The growth in each product was less than 1%, with commercial ASO/ASC growing faster. ASO/ASC products’ costs are lower than for comparable insured products largely due to the comparatively modest per member Sales and Marketing expenses required for large groups that are eligible to use these products. An ASO/ASC group necessarily possesses the statistical advantages of larger size in bearing the medical cost variance risk: this also means that group Sales and Marketing costs are spread through greater numbers of members.
Medicare Advantage comprises a median of 3.5% of Comprehensive members but, for three of the continuous 13 Plans, it exceeds 10%. The median growth in MA was 4.2% with its more costly to administer individual segment increasing by 7.3% and group increasing by 3.3%.
The mainstay Medicare Supplemental product has a median share of 5.4% of Comprehensive membership. This low cost to administer product declined by 1.2% in its membership.
The median decline in Medicaid membership was 14.2%. This is a low cost product. Only five of the thirteen continuous plans offer the product but, for those Plans, their commitment is substantial. The average percent of membership in this product was 5.0%. FEP is a low cost product. Its membership increased by 1.8%.
As Reported Trends
The as reported administrative expense growth was similar to the Constant-Mix growth but, in total, faster. Figure 2 shows that the overall cost growth, on an as reported basis, was 6.6% PMPM, higher than the constant mix growth of 4.0%. Both Sales and Marketing and Corporate Services increased faster while Medical and Provider Management and Account and Membership Administration grew slower before taking the change in mix into account.
As noted above, the lower constant mix growth reflected the effect of the more rapid growth in products that are more costly to administer, especially Medicare Advantage. Moreover, some low cost products grew slower, such as Medicare Supplemental and Medicaid. The effect of this was amplified by faster growth in lower cost Commercial segments: ASO/ASC grew faster than Insured among Commercial.
The focus of the following comments concern differences in cost changes between the two sets of calculations that may be explained by the effect of mix changes, in addition to the underlying cost growth.
Sales and Marketing. Sales and Marketing showed the greatest difference between as reported and constant mix, at 2.1 percentage points, and was the second fastest growing cluster, at 4.9%. Rating and Underwriting showed the largest incremental growth, possibly reflecting the importance of Risk Adjustment activities in Medicare Advantage. Broker Commissions’ growth was more important. They are not present in Medicaid and may reflect growth in MA. Sales cost were faster, as reported, perhaps for a similar reason.
Corporate Services. This cost growth was 0.2 percentage points faster on an as reported basis. Actuarial was significantly faster on an as reported basis, and Corporate Services grew faster as well. Finance and Accounting and Corporate Executive grew slower.
Medical and Provider Management. The Medical and Provider Management was notable among clusters in that, on an as reported basis, it posted significantly slower growth, by 1.4 percentage points. Likely reflecting the effects of our use of medians, both Medical Management and Provider Network grew faster on this basis.
Account and Membership Administration. Growth was 0.2 percentage points slower in the growth in the Account and Membership Administration cluster. Customer Services grew faster while the other differences in function growth were less than one-half of one percentage point.
Trends in Factors Driving Costs
The operational drivers provide additional insights to cost trends. The drivers discussed in this section are estimated staffing ratios, compensation, non-labor costs and propensity to outsource excluding Behavioral Health and Pharmacy. We previously noted their impact on some of the functions themselves.
Recall that on a constant mix basis, expense growth moderated in 2024 from 2023. Staffing ratios increased among continuing plans on a constant mix basis at a mean rate of 5.6%, and was a median of 22.50 FTEs per 10,000 members. This includes the effects of outsourced staffing, discussed later.1 Staffing increased in every function on a constant mix basis. Growth was especially strong in Rating and Underwriting, Advertising and Promotion, Medical Management, Finance and Accounting and Corporate Executive. These ratios exclude staffing for Rx and Behavioral Health benefits.
The median Staffing Costs per FTE were $134,000, an increase of 5.5%. Compensation growth was strong in Medical Management, Enrollment, Customer Services and Information Systems.
Outsourced FTEs were a median of 14% of the total. For the set of all Plans, subfunctions that are more than 19% outsourced included Rating and Underwriting (especially Risk Adjustment) and Medical Management especially Precertification, Nurse Information Line and Health and Wellness. Subfunctions of Application Acquisition and Development, especially Preplanning Project Costs, was highly outsourced. Claim and Encounter Capture and Adjudication was elevated with Payment Integrity being central.
Non-Labor costs per FTE fell by 5.3% as the mean percent of FTEs outsourced increased by 1.7 percentage points to 14.0%.
For Commercial Insured, a mainstay set of products, staffing ratios were 23.64 FTEs per 10,000 members for all Plans.2
1 Outsourced FTEs are often estimated from invoice amounts of BPOs and other similar vendors based on the compensation and non-labor costs of Plans that do not themselves outsource.
2 The staffing ratio for the commercial products is estimated based on Plan reports for their comprehensive products. Also, since the Plans report all PMPM costs for each function by product, we can estimate product staffing costs for any given product using only the assumption that the mix of labor and non-labor costs is the same across all offered products. By focusing on one product we are able to illustrate trends without the distortion of product mix changes.
Costs of Blue Cross Blue Shield Plans, by Cluster, PMPM
Figure 3 shows the cost values of administrative expenses for all 14 participating Plans. This universe of Blue Cross Blue Shield Plans differs from that of last year in product mix and in Plans. In this section we will touch on comparisons with the results reported last year, notwithstanding this limitation. The changes shown in Figure 2 are a better measure of trend.
The effect of expense increases, a change in product mix favoring more expensive products and a slight change in the universe gave rise to Total PMPM expenses that were 11.4% higher in 2024 than 2023. Median PMPM costs were $51.90 PMPM, as shown in Figure 3. Percent differences are in the median values for Total and each cluster value. The prior year values are shown in Appendix A.
The order of the PMPM increase bore resemblance to the rates of growth shown in Figure 2. The second greatest change was in Medical and Provider Management, at 10.1%, to $7.40 PMPM. By contrast, the as reported and constant mix increases for this cluster were the highest. This group of functions includes Provider
Network Management and Services and Medical Management / Quality Assurance / Wellness.
The 10.5% increase in Corporate Services to $7.76 PMPM was vastly greater than the growth rate of the continuous plans on either an as reported or constant mix basis. Activities in this cluster include Corporate Executive, Actuarial, Finance and Accounting, and the Corporate Services function, which is a group of other subfunctions like Facilities, Human Resources and Legal.
Account and Membership Administration had costs that were 7.1% higher than last year at $22.17 PMPM. On a constant mix basis, growth was second fastest though third fastest as reported. This cluster includes the central activities of Information Systems, Enrollment, Claims and Customer Services. This is by far the largest cluster of expenses and it has an outsized effect on cost trends.
Sales and Marketing PMPM costs were 3.4% higher from 2023 to 2024, to $11.82. This cluster increased by 2.8% on a constant mix basis and 4.9% on an as reported basis. This function includes Rating and Underwriting, Sales, Marketing, Broker Commissions and Advertising.
The dispersion metric of Coefficients of Variation (Standard Deviation divided by the mean) declined in total in 2024 and in most clusters, indicating greater clustering. In total, it declined by 2.8 percentage points to 14%. Medical and Provider Management decreased much more, by 13.1 percentage points to 17%. Sales and Marketing declined by 5.9 percentage points to 26%. Corporate Services increased by 3.5 percentage points to 34%, and Account and Membership Administration increased, by 1.6 percentage points to 17%.
Dispersion measured by the differences between the 75th and 25th percentile values also decreased, in total and in all but one of the clusters. In total, this measure decreased by $4.01 with both Sales and Marketing, Medical and Provider Management and Account and Membership Administration decreasing. Only Corporate Services became more dispersed.
Costs of Blue Cross Blue Shield Plans, PMPM by Product
Earlier, we observed that cost requirements of each product offered by the Plans differed so it was helpful to understand trend by reweighting product mix to eliminate the effect of any product mix changes between the years. To do this, we reweight product costs in the prior year to match that of the current year. Figure 4 illustrates the significant differences in the product costs.
Recall that Medicare Advantage products were typically the fastest growing. Their costs are more than double that of Commercial Insured so an increase of this product in Plan portfolios would result in an apparent total increase even if each product cost had no increase. Individual MA PMPM was $152.50, Group was $121.72 and the Total MA was $141.89. The difference between the Group and Individual stems largely from relative Sales and Marketing costs. Group membership is a median of 0.11% of Comprehensive and Individual is 3.7% for all participating Plans.
Similarly, Medicaid declined as a share of the product portfolio, and is 5.3% of comprehensive membership, on average. As its costs are less than 60% of Commercial Insured, its decline leads to apparent growth if there were no increases in any product costs. The low PMPM cost of $37.06 reflected both the modest marketing expenses, plus the prominence of mothers and children in the population served. Only six of the Blue Cross Blue Shield Plans in our set provide this product.
The decline in Medicare Supplemental to 5.2% of comprehensive provides a similar effect, and reenforces the effect of Medicare Advantage, thereby increasing apparent growth in total expenses. At $49.04, it is a below average cost product. This product is for Medicare eligibles and is a secondary payor to Fee-for-Service Medicare. It is being succeeded by MA, regardless of whether it is through migration of members between the products or the preferences of newly eligible seniors.
Moderating the effects of changes of Medicare Advantage, Medicaid and Medicare Supplemental, FEP membership increased for the Blue Cross Blue Shield Plans to 5.2%. It is a low cost product at $34.46. The Federal Employee Program is considered an insured product. It serves Federal Employees and dependents below retirement age but, since Blue Cross Blue Shield Association is the prime contractor and directly assumes certain distribution and enrollment costs, the Plans incur the low Sales and Marketing cost characteristic of ASO/ASC commercial products.
The highest and lowest cost products offered by Blue Plans are not included as Comprehensive. Medicare SNP (included as comprehensive by Independent / Provider – Sponsored Plans had costs of $278.79 PMPM, double that of Medicare Advantage. Stand-Alone Dental had costs of $3.29 PMPM. Stand-Alone Part D’s PMPM costs were $19.18.
Commercial products are the most important to Blue Cross Blue Shield Plans and are responsible for a median of 78.5% of comprehensive membership. ASO/ASC is the lion’s share at 48.0%. By far the most important ASO/ASC product is Indemnity and PPO costs a median of $34.98 PMPM. HMO costs $38.18 PMPM while POS costs $34.29.
The single most important commercial insured product is Indemnity and PPO at a median of $64.61 PMPM. HMO costs $59.81 while POS costs $62.51. Individual, including Exchange, members are included as commercial insured.
Costs of Blue Cross Blue Shield Plans, Percent of Premiums by Product
Many analysts evaluate administrative expenses standardized as percents of premium. While this is straightforward for fully-insured products, in the ratios displayed in Figure 5 and in Figure 6 which follows, “premiums” are expressed as premium equivalents in self-insured products. We calculate premium equivalents as the sum of fees to self-insured groups plus the health benefits associated with those groups.
Aside from Medicare Supplemental, expenses in each product are more clustered when expressed as a percent rather than per member. As shown in Figure 5, the highest cost Medicare Advantage individual product, with administrative costs at 13.9% of premiums was 2.7 times the lowest cost Commercial POS ASO/ASC at 5.1%. In contrast, the Medicare Individual product was 4.4 times that of Commercial POS ASO/ASC when expressed PMPM.
This increased clustering is because of two factors. First, the premium or equivalent denominator is comprised mainly of health benefits, that is, a health benefit ratio of normally 80-90%. Second, many administrative expenses are linked to the health needs of the population served. These include claims, customer services, medical management and the information systems necessary to support them. The remaining differences stem largely from distribution systems’ expenses and, for Medicare Supplement, the scope of benefits.
As with PMPMs, percents of premium equivalents were higher than total comprehensive for Commercial Insured, at 10.2%, while ASO/ASC was lower than average at 6.4%. Within Commercial Insured, POS was low cost at 8.6%, followed by HMO at 8.7% and Indemnity & PPO at 10.5%. ASO/ASC were ranked similarly: POS at 5.1%, HMO at 5.7% and Indemnity & PPO at 6.6%. The ostensible difference between insured and ASO/ASC is merely the means of financing the health benefits, the Plan or the group (the benefit designs are intended to be identical between the product). But ASO/ASC requires the self-insured group to be of sufficient size to absorb health benefit cost variances. The byproduct of this distinction is that self-insured groups are larger organizations which require lower Sales and Marketing expenses per member. (To be clear, “level funding” or “small balance group funding” are considered insured for the purposes of the Benchmarks.)
The expense of FEP resembles ASO/ASC because the Sales and Marketing activities are largely conducted by the Blue Cross Blue Shield Association. Administration was 5.4% of Premium Equivalents.
The lower Sales and Marketing expenses associated with groups is also evident in the MA products with Individual and 13.9% and Group at 9.8%.
Medicaid was 9.6%, above comprehensive total of 9.1%, unlike being a low cost product on a PMPM basis. Medical Management costs are notably high for the population served by Medicaid products. Medicare Supplemental administration was 21.2% of premiums, high cost for this approach rather than low cost for PMPMs. This stems from Medicare Supplemental being a secondary payor to Medicare. Plans offering this product assume many of the responsibilities of other comprehensive products without the necessity to incur the full health care costs of the insured membership. Therefore the premium denominator is smaller.
Costs of Blue Cross Blue Shield Plans, Expense Clusters as Percent of Premium
Figure 6 shows the ratios of administrative expenses to premium equivalents. As a preliminary note, this chart illustrates that, while medians have the advantage of reducing the effect of outlying performance, as the 50th percentile value, they have disadvantages too. For instance, they cannot be meaningfully summed. Also, the following discussion also includes changes in values that are obscured by rounding. Again, this year’s universe differs from last year’s in participants and product mix so that Figure 2 will be a more useful measurement of trends.
The median costs as a percent of Premium Equivalents was 9.1%, 0.2 percentage points higher than last year’s values. Sales and Marketing, Medical and Provider Management and Corporate Services calculated as a percent of premium equivalents in 2024 were substantially unchanged from 2023. They were 2.4%, 1.4% and 1.3% respectively. Account and Membership Administration declined by 0.2 percentage points to 3.7%.
How We Performed This Analysis
CHARACTERISTICS OF THE BLUE CROSS BLUE SHIELD UNIVERSE
This analysis is based on the twenty-eighth annual edition of our performance benchmarks for health plans. The Sherlock Benchmarks (Sherlock Expense Evaluation Report or SEER) represents the cumulative experience of more than 1,000 health benefit organization years.
Each peer group in the Sherlock Benchmarks is established to be relatively uniform. So, within that constraint, participation is open to Blue Cross Blue Shield Plans possessing the ability to compile high-quality, segmented financial and operational data. We surveyed the participants to populate the Sherlock Benchmarks and this summary.
This 27th analysis of Blue Plans is based on a peer group of fourteen Blue Cross Blue Shield Plans who collectively serve approximately 43.3 million members, not including Host, specialty, and other products. This universe is quite robust. Participants in this year’s study serve about 40% of all Blue Cross Blue Shield comprehensive members. Excluding those served by publicly-traded Blue Plans, the participants in this year’s study serve 61% of all Blue comprehensive membership.
Collectively in 2024, the health plan operations of these Plans earned annual premiums plus fees of $168 billion and $292 billion in premium equivalents for Comprehensive products. The total revenues for the group were $173 billion in 2024. The median Plan participating in the Sherlock Benchmarks this year served 2.0 million people with Comprehensive products. The Plans were geographically disbursed, serving 21 states. Thirteen of this year’s fourteen participants also participated last year. The average participation experience in the Blue Cross Blue Shield universe of the Sherlock Benchmarks is 16.6 years.
In addition to the comprehensive members, these Plans also served 61,000 Medicare SNP members, 541,000 members of stand-alone Medicare Part D products and 7.8 million members of Stand-Alone Dental. In addition to these members, the Plans served 10.0 million Blue Cross Blue Shield members through “Host” relationships with other Blue Plans.
Collectively, within the comprehensive products, 80.1% was commercial. Of the commercial members approximately 61.5% were served through self-insurance arrangements.
Medicare Advantage, with 1.8 million members, was offered by 13 Plans. It was 4.1% of the combined comprehensive membership and 14.4% of revenues for comprehensive products. Members in groups represented 34.0% of Medicare Advantage membership. With SNP and Stand-Alone Part D, these products represent 15.3% of total revenues.
Medicare Supplement, with 2.1 million members, was offered by all fourteen Plans, was 4.8% of comprehensive members and 3.2% of revenues for Blue Cross Blue Shield comprehensive products. In total, 18.5% of combined Plan revenues arises from products sold to seniors.
Medicaid HMO, offered by 6 Plans, comprised 6.0% of combined comprehensive membership and 8.5% of comprehensive revenues. FEP served 4.9% of combined members and 10.0% of combined comprehensive revenues.
REPORTING CONVENTIONS
We employ some conventions to make the metrics most beneficial for the audience of Plan Management Navigator.
• The trends reported in this analysis are median changes and, when we refer to PMPM or percent of premium ratios, these too are medians. This measure of central tendency reduces the effect of outlying values on overall trends and values. Since each median value is calculated independently, the components cannot be summed.
• References to growth rates hold the universe constant in the comparison years unless otherwise noted. Rates of change called “as reported” are of health plans participating during both comparison years. When we refer to “constant mix” we are calculating rates of change for that same constant set of Plans after reweighting each Plan’s product costs to eliminate the effect of product mix differences between their comparison years.
• Percent of premium ratios are calculated on a premium-equivalent basis. That is, in the case of ASO/ASC arrangements, we synthesize premium rates by adding to fees the health benefits incurred by the self-insured group. In this way, premium equivalents sum to all of the expenses of health insurance, including profits earned by the health plan, analogous to actual premiums on insured products. While not in accordance with GAAP, this approach has two advantages: comparability of ASO/ASC ratios with those of insured products offered by these Plans, and an intuitive appeal to general readers.
• Expenses and revenues exclude capital costs and investment income. We specifically exclude interest and similar debt capital costs, profits and capital formation costs (debt or equity) such as transaction costs, and interest payments to providers under “prompt pay” laws.
• Participants in and licensees of the Sherlock Benchmarks will note that the values for Account and Membership Administration and Total Administrative costs reported here will differ from those reported in the Benchmarks. The values reflected in Navigator include administrative expenses associated with pharmacy and behavioral health while the Sherlock Benchmarks do not. Because of variation in contracting by employers for these benefits and that the administration of these health services is sometimes outsourced by Plans who accept these management responsibilities, the Benchmark reports carve them out. Pages 22 - 24 in Tab 2 of Volume I of the 2025 Sherlock Benchmarks reconciles these two presentations.
• Expense trends, along with the PMPM and percent of premium ratios, are calculated before the effect of Miscellaneous Business Taxes. These expenses are a special case among administrative expenses since, short of major reorganization, they are impractical to manage. These taxes are primarily related to the Affordable Care Act, and they may vary based on public policy. For Commercial Insured products, the median PMPM value of such taxes is $10.47 for 2024, compared with $8.84 for 2023 and $10.19 for 2022. The 2025 value was approximately 15% of total administrative costs for this set of products.
Note on the Sherlock Benchmarks
The Sherlock Benchmarks are the health plan industry’s metrics informing the management of administrative activities. They are based on validated surveys of 32 health plans serving 58 million Americans and provide costs and their drivers on key administrative activities. The Benchmarks are reported in multiple universes of health plans: Larger Plans, Blue Cross Blue Shield, Independent / Provider-Sponsored, Medicare and Medicaid.
The Sherlock Benchmarks are the “gold standard” of health plan administrative cost benchmarks. Health plans use them to determine whether their administrative costs are competitive, to prioritize for improvement among numerous specific activities and to identify cost drivers such as staffing ratios that, overall and within functions, can help implement those improvements.
These Plan Management Navigator results are excerpted from the Blue Cross Blue Shield edition of the 2025 Sherlock Benchmarks. We will be reporting on the results of the other universes in the months that follow. Detailed health plan costs and operational drivers is available by licensing the Sherlock Benchmarks.
Tables of Contents, report formats, citations, quality assurance and other information can be found https://sherlockco.com/sherlock-benchmarks/
Our 2025 edition Brochure is found here.
https://sherlockco.com/brochure/
In addition, the Sherlock Company website has an application that allows you to try out the Benchmarks free of charge.
If you are interested in licensing these materials or if we can answer any further questions about them or you have questions about this Plan Management Navigator, we hope you will not hesitate to contact us (sherlock@sherlockco.com)
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