Sherlock: Analysis Of The Economies Of Scale Of Blue Cross Blue Shield Plans

1. Of the total administrative costs of health plans, only ten functions, totaling 17.8% of all administrative expenses were subject to economies of scale
2. While these scalable areas had a P-Value of 10% or less, there were additional factors other than scale that explained cost differences between the Plans
3. A doubling of the size of the health plan would lead to scalable administrative costs equal to 85.8% of their pre-doubling per member cost value
4. The modest slope of the scale line (85.8%) combined with the modest proportion of scale expenses subject to scale effects (17.8%) means that the overall effect of scale is modest
5. Product mix increasingly distinguishes the otherwise very similar Blue Cross Blue Shield Plans
6. This year’s scale study, when compared to last years, is consistent with the theory that the costs to adapt the Affordable Care Act were higher than for smaller plans

Source: Sherlock
Source URL: http://sherlockco.com/press/

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