Managing Premiums

The rising cost of health care threatens the future of the state's landmark health care reform law and poses an unsustainable burden on consumers, employers, and government.

At Blue Cross Blue Shield of Massachusetts, we believe that you—our members and customers—should know how your premium dollars are being spent and also understand the true drivers of health care costs.

The graphic below shows a breakdown of each premium dollar. You'll notice that nearly 90 cents of every dollar we receive in premiums is used to pay the medical expenses of our members (e.g. hospital/facility services, professional services, prescription drugs and ancillary services). Approximately 10 cents is used for administrative purposes (e.g. salaries & benefits, technology investments, care improvement programs for our members, facilities, etc).

Based on year-end 2010 results

Given that approximately 90 cents of every premium dollar is used to pay the medical expenses of our members, the greatest opportunity for Making Quality Health Care Affordable is to slow the increase in the cost of these medical expenses. As background, the main factors driving medical expenses are the following:

• The increase in the actual unit cost of health care services (e.g. what a doctor's visit costs this year compared to the same office visit last year)
  
  
• The increase in the number of health care services, known as use, and changes in the intensity of health care services, known as severity (e.g. the demand for prescription drugs or the use of an MRI instead of an X-ray.)
  
  
• The increase in utilization of higher cost settings and providers (e.g. the shift of services to tertiary from community hospitals; increased use of radiology and lab services in hospitals vs. free standing settings)
  
  

For Blue Cross Blue Shield of Massachusetts, the change in the unit cost of health care services accounts for 50% of the overall increase in our medical expenses, the change in use and severity of health care services accounts for 30% of the increase, and change in provider mix (shift in utilization to higher cost settings and providers) accounts for 20%.

Source: Q2 2011 Rate Review

Learn more about our business
As a not-for-profit health plan, we think it's important to be transparent not only about how we spend our members' premiums, but also about how we run our business. Click on the links below to learn more:

• The Importance of Reserves
• Detailed information about revenues, expenses and membership
• Glossary of Terms

Note: Information about our revenue, expenses, and membership is filed with the Massachusetts Division of Insurance.