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

PHILADELPHIA–(BUSINESS WIRE)–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
and is posted at
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
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 (,
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.


Sherlock Company
Douglas B. Sherlock, CFA, 215-628-2289