Medicare Advantage Administrative Costs Increased by 3.8% in 2013

In 2013, total administrative expenses of plans focused on Medicare increased by 3.8% PMPM, while Account and Membership Administration costs increased by 8.1%. While the surge in Account and Membership Administration was unusually high, the increase in total administrative expenses was the lowest since 2010. Relative to premiums, administrative expenses were 10.3%. For Medicare Advantage alone, they were 8.5% compared with 8.7% in 2012.

Claims and Customer Service functions were central to the cost increases. While Sales and Marketing costs decreased, total membership was higher by 12.4% for the Medicare Advantage products.

Additional information was published earlier today in Plan Management Navigator, and is posted at: sherlockco.com/navigator.

We will discuss the results via free web conference on Wednesday, October 22 from 2:00 PM to 3:00 PM Eastern Daylight Time. Sherlock will offer a brief presentation, followed by questions and answers. To participate in the web conference, please register at: gotomeeting.com/register/423032690. Once registered, dial-in information and a link to connect to the web will be provided in a confirmation email.

The Navigator analysis excerpts from the 2014 Medicare Plan edition of the Sherlock Expense Evaluation Report (SEER). This benchmarking study analyzes in-depth surveys of 11 Medicare Plans. The focus of the analysis is 1.1 million members served by these plans but additional detailed analysis of Medicare products in other universes brings the total to 2.3 million or 16% of all MA members. The complete analysis may be licensed.

The Medicare sector of health plans is increasingly interesting because of its growth. The increase in Medicare Advantage membership has exceeded total beneficiaries since 2005. The need for cost management is amplified by the new MLR rules.

Besides the Medicare universe, other universes include Independent/Provider-Sponsored plans, Blue Cross Blue Shield plans and Medicaid plans. Collectively, these organizations serve nearly 40 million insured Americans.

This is the 17th consecutive year of the Sherlock Benchmarks. With cumulative experience of 660 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.