Updated on 24 Dec 2025
A health insurance policy comes with its own terms and metrics that can sometimes feel confusing to understand. PMPM is one such term. It stands for “per member per month.” PMPM in healthcare is a type of cost that represents the amount paid or received monthly for each individual enrolled in a managed care plan, often called capitation. It is the average cost or revenue generated per individual enrolled in a health plan within a month.
Continue reading this blog for more information on PMPM in the health insurance industry.
What is per member per month (PMPM)?
Per member per month (PMPM) is a healthcare finance metric that measures the average cost of providing health coverage and services for each enrolled individual every month. This cost can include medical claims, insurance premiums, administrative expenses or a combination of these.
Here is how it works:
- Useful for cost analysis by dividing the total cost or spending on healthcare services for a specific group by the number of members.
- Helps in financial budgeting and planning. It helps estimate future costs based on historical data and can assist in financial planning for healthcare services.
It is a performance indicator that evaluates the efficiency of healthcare programmes.
Here is how it is calculated:
The formula for calculating PMPM is straightforward:
PMPM = Total Number of Members / Total Cost of Spending × Time Period
Examples of PMPM in healthcare
In the healthcare industry, PMPM is used in several ways to track and manage costs. Some practical examples include:
Insurance premiums
An organisation can calculate the cost per employee as a PMPM cost.
Let’s understand with an example:
If the company has 500 employees, and the premium is for ₹ 5,00,000 per month, then the PMPM is ₹ 1,000.
Medical claims
Insurance companies use PMPM to calculate the average medical claims per member each month.
For example, the total claim for 2,000 members is ₹ 20,00,000 every month, then PMP is ₹ 1,000.
Capitated payments
Healthcare providers on a capitated model receive a fixed PMPM payment for each patient under their care to encourage efficient and preventive care.
How is PMPM different from other similar terms?
Here is how PMPM differs from other similar terms:
- Per capita cost: It refers to the average cost per person over a certain time period (often monthly, quarterly or annually).
- Per episode: This metric isolates the cost associated with a single medical encounter or “episode”, such as a hospital stay, surgery or outpatient visit.
- Per diem: It refers to the daily rate for a patient’s care in a hospital or facility.
Conclusion
Whether you hold a health insurance policy for a family or an organisation that has insured its employees, understanding PMPM can help manage the overall costs. By offering a clear view of the average monthly cost per member, it helps families, organisations and insurers plan budgets, compare policies and predict healthcare expenses.
While you focus on keeping your family healthy and prepared, let us help you manage the financial side of healthcare. Get personalised advice on health insurance by filling out the form on this page.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It is not intended as a substitute for professional advice, diagnosis or treatment. Please consult a certified medical and/or nutrition professional for any questions. Relying on any information provided in this blog is solely at your own risk, and ICICI Lombard is not responsible for any effects or consequences resulting from the use of the information shared.