PHILADELPHIA--(BUSINESS WIRE)--Blue Cross Blue Shield Plans had administrative cost increases of 5.9% in 2017, far higher than the previous three years, and the highest since 2013. Last year’s increase was 0.6%. Increases are calculated for continuously participating Plans, after backing out the effect of mix changes.
On an as-reported basis, per member costs grew by 5.1% compared with 0.8% the prior year. A shift in mix to a less expensive product meant that reported expenses appeared to increase by less than if the mix was constant. ASO/ASC increased as commercial insured membership declined. Notwithstanding, Medicare Advantage was the fastest growing product.
These increases exclude the effect of ACA-related and other taxes, which plummeted, and led to total administrative expense decline of 2.3%.
Every cluster of expenses accelerated. Account and Membership Administration increased by 3.0% per member, slower than overall administration. Customer Services and Claims functions declined while Rating and Underwriting, Corporate Executive, Association Dues, Provider Network Management and Services, Medical Management, Actuarial increased, sometimes sharply.
Staffing ratios were slightly higher while outsourcing was stable. Compensation increased partly due to inflation but also because the key areas of staffing growth employed higher cost FTEs, while the lower cost functions declined in staff.
The median total costs for the universe as a whole were $34.99 per member per month, higher than last year’s $32.00. The median administrative expense ratio was 8.9% compared with 8.3% last year.
Additional information was published recently in Plan Management Navigator, and is posted at sherlockco.com/navigator.
We will discuss the results via free web conference on Monday, June 25th from 2:00 PM to 3:00 PM Eastern Daylight Time. Douglas Sherlock will offer a brief presentation, followed by questions and answers. To participate in the web conference, please register at sherlockco.com/webinar. Once registered, dial-in information and a link to connect will be provided in a confirmation email.
The Navigator analysis excerpts from the 2018 Blue Cross Blue Shield Plan edition of the Sherlock Benchmarks. This benchmarking study analyzes in-depth surveys of 14 Blue Licensees serving over 37 million members. Surveyed Plans comprise 52% of the members of Blue Cross Blue Shield Plans not served by publicly-traded companies.
Health plans that optimize their administrative costs amplify their operating profits and mute operating losses. Managing what you measure facilitates your achievement of that goal. In a competitive environment, measurement implies comparison with the leaders in your industry.
The Sherlock Benchmarks reflect over 815 health plan years of experience spanning 21 consecutive years. With cumulative experience of 815 health plan years, they are “the gold standard” of benchmarks used to measure and manage health plan administrative activities. Thus planning, budgeting and cost benefit analyses are credibly informed by the Sherlock Benchmarks.
Besides the Blue Cross Blue Shield universe, other universes include Independent/Provider-Sponsored plans, Medicare plans and Medicaid plans. Collectively, the approximately 38 participating plans serve nearly 50 million insured Americans.
Sherlock Company (www.sherlockco.com), based in North Wales, 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.
