April 28, 2017
Health plan administrative costs rose in 2015
Minnesota health plans spent $1.7 billion, or 7.6 percent of their total expenditures, on administrative costs in 2015, the highest level since 2009, according to a new Minnesota Department of Health report.
Administrative costs include health plan expenses related to claims processing, setting up provider networks, marketing products, and other business activities. They do not include health plan profits or taxes.
2015 health plan per member administrative spending was also the highest it has been during the past ten years at $328 per member, according to Administrative Costs at Minnesota Health Plans in 2015, an annual report required by the state legislature.
The report looked at the administrative costs of 50 health plans that each collected more than $3 million in health premiums from Minnesota residents. Administrative spending for Minnesota’s major nonprofit health plans, such as HealthPartners, Medica, Blue Cross Blue Shield of Minnesota, PreferredOne and UCare ranged from about 5 to 15 percent. Among this group, Medica health plans (4.8 percent) and Ucare (6.4 percent) had relatively low administrative costs. The insurer with the lowest administrative costs was Cigna Health and Life Insurance Company at 1.6 percent. The highest was Principal Life Insurance Company at 38.4 percent.