A large national MCO recently entered a major Southwestern metropolitan market. The managed care plan anticipated that, with an intensive advertising campaign and sales effort, it would have 75,000 sub- scribers after 2 years. It planned on charg- ing a premium of $1,800 per subscriber. Marketing and personnel costs directly related to this effort were anticipated to be $250 per subscriber. Prior to the MCO's entry into the market, two of the large ter- tiary facilities in the region began to offer their own managed care plans in a PHO arrangement with their medical staffs. The result was aggressive discounting of the managed care premiums. The national, MCO chain dropped its premium to $1,400 per subscriber. Direct costs remained the same, yet because of the competition, the national MCO was only able to enroll 45,000 subscribers.

a. What was the variance because of the failure to get the gross marketing contribution?

b. What was the variance due to the lack of enrollment success?