Milliman analysis of Medicaid managed care administrative costs focuses on true administrative costs without taxes and fees

June 21, 2016

Milliman research into the administrative expenses associated with risk-based Medicaid managed care plans summarizes the calendar year 2015 experience for selected financial metrics of organizations reporting Medicaid experience under the Title XIX Medicaid line of business on the National Association of Insurance Commissioners annual statement. The report aims to provide reference and benchmarking information for certain administrative expense categories used in the day-to-day analysis of Medicaid MCOs' financial performance. It also explores the differences among various types of MCOs using available segmentation attributes defined from the reported financial statements. Key findings include:

  • The average administrative loss ratio (ALR) for Medicaid focused plans is 8.8% after removing the impact of taxes and fees;
  • CY 2014 and 2015 ALR values, net of taxes and fees, are considerably lower than previous years; and
  • The administrative per member per month (PMPM) value continues to climb as average premium levels increase.