Health insurance plans are required to report their administrative expenses.  For health plans in the for the large group, small group, and individual insured markets, an new report from Milliman details insurers’ administrative expenses in five categories:

  1. Expenses for improving healthcare quality
  2. Claims adjustment expenses
  3. Agents and brokers fees and commissions
  4. Direct sales salaries and benefits expenses
  5. Other general and administrative expenses

Milliman’s research report, Administrative Expenses: 2010 Commercial Health Insurance, provides interesting data and an insightful analysis of health plans expenses across the three major commercial markets.  It also serves as a helpful baseline to track how health plans change their administrative spending in response to new Minimum Loss Ratio (MLR) regulations, Health Insurance Exchanges, and new market conditions.

All U.S. health insurance issuers with positive earning premium, that incurred claims, that had 2010 member months, and that submitting Supplemental Health Care Exhibits in 2010 were included in the Milliman analysis.

The report shows a 30 percent difference in per-member-per-month average 2010 expenses between the small group and large group insured market, with the latter reporting the lowest expenses at $30.84 and the former reporting expenses at $43.83 per-member-per-month. The largest contributor to this difference was agents and brokers fees and commissions followed by other general and administrative expenses.

Administrative expenses for the small group market were higher than those for the individual market on a per-member-per-month basis, yet the contrary was true on a percent of premium basis. This is attributed to higher premiums charged in the small group market. Greater variance on a per-member-per-month basis was found within the individual insured market.

To read or download the full report, click here (PDF).