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Sherlock: Blues Plan Administrative Costs Vary Widely

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NU Online News Service, Aug. 14, 6:40 p.m. – Companies are spending a lot more to run some health plans than others, according to results of a new study from The Sherlock Company, North Wales, Pa.

The managed care research firm surveyed Blue Cross and Blue Shield companies that cover 26 million people. It found that monthly administrative costs for commercial plans ranged from $10.12 per member in 2001 for one company’s “administrative services only” preferred provider plans to $43.61 per member for another company’s insured point-of-service plan.

The mean monthly cost per commercial member was $21.06.

When Sherlock surveyed the Blues in 2000, it found that average monthly administrative costs ranged from $8.49 per member for the thriftiest insured preferred provider plan to $43.28 per member for the most expensive insured point-of-service plan, with a mean cost of $20 per commercial member.

“The benchmarks are intended to facilitate comparisons and to assist in the management of health plan administrative expenses,” according to Sherlock Company researchers.

The company compiles similar administrative expense benchmark figures for publicly traded health insurers and managed care companies inside and outside the Blues system.

Experts warn against taking raw expense figures of any kind at face value, out of context.

Companies use different rules for classifying expenses, and a plan with a successful, expensive member health education program could have a combination of sky-high administrative expenses and unusually low claims costs.

But the Sherlock figures do suggest, for example, one reason why Medicare health maintenance organizations have been so unpopular: mean monthly administrative costs rose to $41.81 per member in 2001 from $40.44 per member in 2000.

The Medicare HMOs were, on average, almost twice expensive to run as other types of plans.

Another table, which shows how much the Blues spent on specific administrative functions, illustrates the huge differences in the companies’ operating strategies.

Sherlock researchers found that average monthly costs for management of provider networks and management of use of care ranged from 94 cents per member to $5.03 per member, with a mean of $2.13.

Monthly costs for another meat-and-potatoes function, accounting and member administration, ranged from $2.41 per member to $9.91 per member, with a mean of $4.90.


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