SPOTLIGHT: Health insurers don't have to be big to survive

Most people are shocked to learn there aren't economies of scale in the health payer business, says Douglas Sherlock, a chartered financial analyst and president of Sherlock Company. "The large national firms greatly resemble Blues plans and independent provider-sponsored plans," he said. "You'd figure that firms with a million members would have such strong economies of scale that costs would be lower. We don't see that." In fact, while many people believe that only the large will survive, that's not at all clear to Sherlock based on administrative cost evidence. That's just one of many nuggets of wisdom Sherlock shared during a recent conversation with FierceHealthPayer. For the past 13 years, Sherlock's Gwynedd, Penn.-based firm has surveyed mid-sized and large health insurers to produce benchmarking reports on administrative costs.