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Industry Spotlight > Broker Dealers

Cap Gemini: Managed Care Sales Costs Vary Widely

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NU Online News Service, May 21, 2003, 12:58 p.m. EDT – Sales and marketing costs at large U.S. managed care companies surveyed by Cap Gemini Ernst & Young U.S. L.L.C. average $5.11 per member per month.

Carriers in the 25th percentile pay $4.51 per member per month for sales and marketing, and carriers in the 75th percentile pay $5.35, the consulting firm says.

The variation looks modest, but even small differences can have a big effect on carrier productivity, because a typical carrier earns less than $5 in operating profits per member per month, according to Cap Gemini figures.

The sales cost and profit figures come from a report on Cap Gemini’s 2002 Managed Care Benchmarking Study. A team based in Cap Gemini’s Vienna, Va., office asked large and midsize carriers about 900 performance measures.

In addition to sales costs, questions focused on areas such as administrative costs, claim-processing costs, use of disease management programs, success of pharmacy management programs, and use of Web-based and telephone-based customer service tools.

The researchers found, for example, that carriers that spend more on pharmacy management seem to have lower pharmacy claims costs.

The researchers also looked at the role of brokers in the distribution process. The researchers found that carriers are now getting 89% of their new groups through brokers, up from 83% in 1999.

“There’s a lot of variation in broker productivity,” says Dr. Peter Kongstvedt, the Cap Gemini vice president who led the benchmarking study team.

Kongstvedt says one of the most important factors affecting the efficiency of carrier-broker relationships turned out to be the ability of brokers to enroll new groups quickly and accurately.

At carriers that reported broker enrollment accuracy of 98% or higher, broker fees ate up less than 2% of new sales revenue.

At carriers that reported broker enrollment accuracy rates under 95%, broker fees swallowed more than 3.5% of new sales revenue.


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