Blue Cross – Blue Shield Administrative Survey

Posted on August 3, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Cost Trends Demonstrate a Decline in 2007

By Douglas B. Sherlock; CFA

PRESS RELEASE REPORT

Gwynedd, Pennsylvania

The per-member [pm] administrative cost growth for BC/BS 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. And, plans reported total administrative expenses of $25.36 PMPM. 

All cited values exclude investment and non-operating income and expense, income taxes and miscellaneous business taxes.

Sherlock Expense Evaluation Report

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 the Sherlock Company. More than 90% of participants also participated in the prior year’s survey and nearly 80% have five or more years of experience participating in our benchmarks.

Benchmarks and Metrics

The Sherlock Company 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.

Administrative Growth

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.

In fact, the Sherlock Company said 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 service costs per member declined by 6.2% and provider and medical management costs increased by 2.2%.”

Assessment

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-08-07.pdf

Conclusion

Your thoughts and comments on the above findings are appreciated? Do they agree, or disagree, with your factual or heuristic cost impressions of this institutional space?

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The 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 for more information.

215-628-2289, sherlock@sherlockco.com or visit www.Sherlockco.com 

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