Continued Decline in Administrative Expense Growth

Independent/Provider-Sponsored plans’ per member administrative costs grew by 5.3% in 2025 versus 6.2% in 2024. This was the lowest growth since the effects of Covid adaptation in 2021. Growth in costs for the cluster of Account and Membership Administration, at 6.4%, was the slowest growth since 2021. Median PMPM costs for all reporting Plans were $59.60 PMPM versus $55.67 PMPM last year as the Medicare Advantage mix increased.

At 9.8% of premium equivalents, health plan administrative costs were higher by 0.5 percentage points from 2024.

Administrative costs were affected by a 5.4% decline in staffing ratios, an increase in compensation likely affected by a shift towards more expensive employees and a decline in non-labor costs.

The results are summarized in Plan Management Navigator, posted at sherlockco.com/navigator.

This Navigator draws from the 2026 Independent/Provider-Sponsored plan edition of the Sherlock Benchmarks. It analyzes and details results from in-depth surveys of 13 IPS plans serving 9.0 million members.

We will discuss the results during a free web conference on Thursday, July 23^rd from 2:00 PM to 3:00 PM Eastern Time. Douglas Sherlock will offer a brief presentation, followed by questions and answers. To participate in the web conference, please register at sherlockco.com/webinar. Once registered, dial-in information and a link to connect will be provided in a confirmation email.

The Sherlock Benchmarks are the health plan industry’s “gold standard” metrics of administrative activities, costs and operational drivers. They reflect 29 consecutive years and more than 1,000 health plan years of experience. Health plans use the Sherlock Benchmarks to determine whether their administrative costs are optimal and to prioritize improvements among numerous specific activities. Other applications include informing strategic corporate planning and cost-benefit analyses.

This year, collectively, Benchmark participants serve 50 million Americans in IPS and other universes. Other universes include Blue Cross Blue Shield plans, Medicare plans and Medicaid plans. Health plan users of the Sherlock Benchmarks serve nearly 200 million members since June 2023.

Sherlock Company (www.sherlockco.com), based in Gwynedd Valley, 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.

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Continued Decline in Administrative Expense Growth