What Is Member Month?
Member month refers to the number of individuals participating in an insurance plan each month. Member month is calculated by taking the number of individuals enrolled in a plan and multiplying that sum by the number of months in the policy.
Understanding Member Month
Member month statistics are most commonly found in the reports of group insurance companies, such as group health plans. Determining how many individuals are enrolled in an insurance plan requires dividing the total number of member months by the number of months in the year. Thus, if an insurer indicates that its member months total 1500, then the total number of individuals covered is around 125 (1,500 member months / 12 twelve months). This is an approximation because some members may have policies that last a year, while others may have policies that last a shorter duration. For example, 1,500 member months could mean 125 members on annual policies, or it could mean 100 members on twelve-month policies and 50 members on six-month policies ([100 x 12 months] + [50 x 6 months] = 1,500 member months).
One individual who has a policy that lasts a year creates twelve-member months (1 person x 12 months in the policy). If that policy has a duration of six months, a single-member will generate six-member months (1 person x 6 months in the policy). For policies with multiple members, such as a family on a health insurance policy, the number of member months is larger because each family member counts. For example, a family of four enrolled in a twelve-month health insurance policy generates 48 member months (4 people x 12 months in the policy).
Other Calculations Using Member Months
Member months can also be used to calculate the average monthly premiums. This is done by dividing the revenue generated by a group policy by the total member months, which gives an approximation for the average cost of a policy.
The member month statistic can also be used to figure out PMPM, which stands for "cost per member per month." This calculation is often used by health insurance companies to determine the average cost of health care for each of their members. PMPM is also used by businesses outside the healthcare industry whenever these businesses offer healthcare benefits to employees. PMPM helps companies estimate how much each individual member should be charged for coverage.
How to Calculate PMPM
To calculate PMPM, choose a year for which you want to calculate PMPM, determine the number of people covered under the plan for that year, and determine the member months by multiplying the number of people covered (for all 12 months of the year) by 12. Then, determine the total cost of healthcare benefits for all of the members under the plan for this year. Divide the total cost of healthcare benefits for all members by the number of member months to arrive at the PMPM for the year.