Core Cost Growth Modestly Accelerated for Medicaid-Focused Plans

Medicaid-focused plans’ per member Core administrative costs grew by 5.6% in 2025 versus 5.0% in 2024, holding product mix constant. This was the fastest growth since 2020. Growth in costs for the cluster of Account and Membership Administration, at 6.8%, was the fastest growth for that cluster since 2019. Median PMPM costs for all products for all reporting Plans were $55.37 PMPM versus $52.40 PMPM last year.

At 8.1% of premium equivalents, health plan administrative costs were lower by 1.1 percentage points from 2024, as premiums grew by double digits. Premiums and premium equivalents per member grew at a median of 13.8% among the continuously participating plans, and by 16.1% for Medicaid HMO.

Administrative costs were affected by a 6.1% decline in staffing ratios, holding product mix constant, an increase in compensation per FTE, an increase in non-labor costs per FTE and a greater propensity to outsource. Medicaid membership of the continuously participating plans declined at a median of 3.5%, which may have contributed to growth in per member costs.

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

This Navigator draws from the 2026 Medicaid plan edition of the Sherlock Benchmarks. It analyzes and details results from in-depth surveys of 12 Medicaid-focused plans serving 5.2 million Medicaid HMO and CHIP members and 8.4 million members in total. Medicaid products comprised an average of 56% of plan revenues.

We will discuss the results during a free web conference on Wednesday, October 7^th 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 approximately 53 million Americans in Medicaid and other universes. Other universes include Blue Cross Blue Shield plans, Independent/Provider-Sponsored plans, Larger Plans, Emerging Plans and Medicare 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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The 5.6% growth in Core per member costs was unusually rapid; a decline in Medicaid plan membership may have contributed.