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For July 2011
By Douglas B. Sherlock, CFA
Please find attached below the July 2011 Edition of Plan Management Navigator. In this month’s edition, we summarize the administrative cost trends of Blue Cross Blue Shield Plans participating in our recently completed benchmarking study. The 27 plans, nearly 70% of total Blue plans, collectively serve 38.3 million members with comprehensive products.
Results
The median administrative expense ratio for this peer group in 2010 was 9.2%, down from 9.7% in 2009, 9.9% in 2008 and 10.4% in 2007.
While per member Sales and Marketing cost trends increased, Corporate Services costs decreased. Provider and Medical Management and Account and Membership Administration cost growth, per member, sharply declined.
Managed Expenses
Health plans are heavily committed to the management of administrative expenses. To adapt to the weak economic environment, they are taking steps to assure that the effects of premium rate pressures and enrollment weakness do not amplify reductions operating profits. They do this by not treating their administrative expenses as substantially fixed. In addition, the Patient Protection and Affordable Care Act’s increased scrutiny of premium rates, and enforcement of medical cost minimums (relative to premiums), elevates administrative expense control as the central aspect of managerial discretion.
Assessment
Link: Navigator July 11
Conclusion
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Filed under: Health Economics, Health Insurance, Healthcare Finance | Tagged: CFA, Douglas B. Sherlock, Plan Management Navigator | Leave a comment »
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