PHILADELPHIA, PA — Administrative costs at Medicare-focused health plans declined 0.3% per member in 2025, the weakest cost growth in a decade, as staffing levels fell and premium growth pushed administrative expenses to a smaller share of revenue, according to an analysis by Philadelphia-based Sherlock Company.
Median administrative costs across all products at the plans surveyed fell to $56.76 per member per month from $57.21 a year earlier. Administrative costs had increased 3.6% in 2024.
As a percentage of premium equivalents, administrative expenses dropped to 8.5%, down 0.8 percentage points from 2024 as premiums grew at a near-double-digit rate.
The results suggest Medicare-focused insurers restrained administrative spending even as compensation and other expenses increased.
Staffing ratios declined 5.1% after adjusting for product mix, while compensation per full-time-equivalent employee and non-labor costs per employee increased. Plans also relied more heavily on outsourcing.
Costs for account and membership administration increased 0.5%, the slowest growth for that group of functions since 2021.
The findings come from the 2026 Medicare edition of the Sherlock Benchmarks, based on detailed surveys of 11 Medicare-focused health plans. The participating organizations serve 2.1 million Medicare Advantage and Medicare Special Needs Plan members and 15.4 million members overall.
Medicare products accounted for a median 35% of participating plans’ revenue.
Sherlock Company has compiled its administrative-cost benchmarks for 29 years, using the data to compare health plan spending and operating practices. Participants in its broader benchmarking program this year collectively serve 52 million people across Medicare and other insurance markets, including Blue Cross Blue Shield, Medicaid and independent or provider-sponsored plans.
A summary of the Medicare findings is available in Sherlock Company’s Plan Management Navigator at sherlockco.com/navigator.
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