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Blue Cross Blue Shield Plan Administrative Costs Increased in 2018
[June 11, 2019]

Blue Cross Blue Shield Plan Administrative Costs Increased in 2018


Blue Cross Blue Shield Plans, among continuously reporting plans, had costs in 2018 that increased by 5.5% per member, up from an increase of 5.1% for 2017. Reweighting to eliminate the effects of product mix differences between the years, per member costs increased by 6.7% as compared with 5.9% in 2017. ASO/ASC (News - Alert) increased as commercial insured membership declined. Medicare Advantage continued to grow rapidly.

Our key findings are:

  • Most clusters of expenses grew at rates less than last year.
  • Uniquely, Account and Membership Administration's growth rate increased.
  • Growth in Information Systems was the single most important reason for administrative expense increase in 2018.
  • The shift in favor of products and market segments that are lower cost to administer muted the real growth.

Staffing ratios increased by 6.8%, especially in Information Systems. Approximately 19 FTEs serve every 10,000 members in the commercial products. Compensation, including all benefits except OPEB, increased at a median rate of 3.8%. The median proportions of FTEs that were outsourced was 11.0%.

After the effect of the Miscellaneous Business Taxes, total administrative expense PMPM increased by 17.9% compared with a decline of 2.3% in the prior year due to the restoration of the Annual Fee on Health Insurance Providers.

For the universe as a whole, the median total costs were $38.51 per member per month, higher than last year's $34.99. The median administrative expense ratio was 9.0% compared with 8.9% 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 Wednesday, June 12th 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 2019 Blue Cross Blue Shield Plan edition of the Sherlock Benchmarks. This benchmarking study analyzes in-depth surveys of 14 Blue Licensees serving 37 million members. Surveyed Plans comprise 52% of the members of Blue Cross Blue Shield Plans not served by publicly-traded companies.


While health plan managers are responsible for the health care for many of your members, they manage the administrative services necessary for all of them.

In the current environment, optimizing administrative expenses is a high priority for health plan managers. Plans have completed their adaptation to the Affordable Care Act and the bulge in Exchange and Medicaid members. Plus, administrative expense visibility has been heightened by the rhetoric of presidential candidates.

The Sherlock Benchmarks reflects approximately 855 health plan years of experience spanning 22 consecutive years. They are "the gold standard" of benchmarks used to measure and manage health plan administrative activities. 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 40 participating plans serve nearly 51 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.


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