Medicare-Focused Health Plan Administrative Costs decreased by 6.7% in 2014

PHILADELPHIA--()--In 2014, administrative expenses of Medicare-focused plans decreased at a median rate 6.7% per member, the lowest in at least the past six years. Account and Membership Administration costs also decreased, by 5.3%, the first decrease over the past six years. These comparisons eliminate the effects of product mix and universe changes. The median costs for all products offered by these plans, before Miscellaneous Business Taxes, was $45.71 per member per month.

Per member, Sales and Marketing costs declined by 2.4%. The Corporate Services cluster declined by 4.7%. The Medical and Provider Management function declined least, by only 0.8%. These growth trends eliminate the effect of product mix changes.

Most functions declined and those declines comprised most costs. Provider Network Management and Services, Information Systems and Actuarial all significantly contributed to the overall decline.

These declines outweighed the most important change, on a weighted basis, the internal Sales function. As this function increased, per member broker Commissions decreased. For the continuously participating plans, Medicare membership increased by 17% as commercial membership was effectively flat. Approximately one-third of all eligible Medicare beneficiaries participate in the Medicare Advantage program.

Additional information was published recently in Plan Management Navigator, and is posted at www.sherlockco.com. We will discuss the results via free web conference today Wednesday, November 4th from 2:00 PM to 3:00 PM Eastern Standard 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 2015 Medicare Plan edition of the Sherlock Expense Evaluation Report (SEER). This benchmarking study analyzes in-depth surveys of 10 Medicare Plans serving 680,000 Medicare Advantage members 36,000 Medicare SNP members. The report references other universes offering Medicare Advantage so the experience of 1.72 million Medicare Advantage members are included.

A challenging economy and the Affordable Care Act make streamlining administrative costs a high priority for health plans. An express purpose of the MLR rule is to “create incentives … to become more efficient.” SEER provides the initial step in this process by helping health plans identify and prioritize cost variances.

Besides the Medicare universe, other Sherlock Benchmark universes include Blue Cross Blue Shield plans, Independent/Provider-Sponsored and Medicaid plans. Collectively, these organizations serve more than 41.5 million insured Americans.

This is the 18th consecutive year of the Sherlock Benchmarks. With cumulative experience of nearly 700 health plan years, they are “the gold standard” of benchmarks used to measure and manage health plan administrative activities.

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.

Contacts

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

Contacts

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