The Financing of Health Care Economic Issues Simulation Paper Health care system has evolved tremendously in the last few years, with many changes with the health care laws including but not limited to Universal Health Care, many individuals have choices when it comes to their coverage. According to healthcare. gov, in January of 2015, an employer with 50 or more full time employees will have to make an Employer Shared Responsibility Payment if a full time employee gets a lower health coverage premium cost if insurance is purchase in a marketplace.
However, employers are not subject to this law if the numbers of employees are lesser than 50 but are still expected to offer coverage for their employees. (healthcare. gov) Employers must make sure that when choosing coverage for their employees, these should be within their needs; within health care requirements as well as inexpensive keeping in mind that lower cost may not necessarily mean better.
With many varieties in health care plans such as Preferred Provider (PPO), Point of Service (POS), and Exclusive Provider Organization (EPO); the Health Maintenance Organization (HMO) is the most preferred and utilized group health insurance plan. As a HMO representative of Castor Insurance, health care coverage will be built, including the potential utilization of the services by different enrollees. Castor Collins Health Plan Castro Collins Health Plan is a regional HMO that was founded in 1999.
As a HMO, they provide health care services as well as health insurance to individuals in its statewide network of physicians and hospitals utilizing a capitation model to compensate their network of providers. Currently, there are 100,000 enrollees and these numbers are increasing. The responsibility of a Vice President in Strategy and Financial Planning is to interact with new clients and formulating health plans that will suit their needs. With the help of colleagues such as the Chief Financial Officer Helen Fouerman, the Chief Medical Officer Jonathan
Wikes, and the Executive Vice President of Planning and Development, Adam Hunter, a plan will be put together that will include pricing and setting insurance premiums. In January of 2006, Castro Collins was approached and met with two groups of people for health insurance coverage. These groups are Constructit and E-editors, neither of them have group employer’s insurance. Constructit have 1000 people and they are willing to pay a maximum of $4000 per person as an annual premium, meanwhile E-editors will pay a maximum annual premium of $4500 per person with 1,600 people.
Castor Collins offers three types of health plans: Castor Standard, Castor Enhanced, and the customized plan called Castor Enhanced Minor. The standard plan does not cover pre-existing medical conditions, the enhanced plan, however, cover pre-existing medical conditions and offers more services. Castor Enhanced Minor is a customized plan that is almost equivalent to Castor Enhanced with somewhat lesser services that requires high utilization. Demographics and Health Care Risk Factors
There are 550 men and 450 women employees in Constructit with ages 26 to 45 and 60 percent from this age group ranging from 26 to 42 are married. This means, spouses and children need to be considered in getting health plan. Also, great physical activities are involve within thirty- two percent of the people at Constructit, while 25 percent of the people has moderate physical activity. The remainder which is 43 percent of the people involves activities that are sedentary.
There are no major health risks out of the thirty-eight percent an equivalent of 170 men and 210 women in the workforce. Injuries, respiratory system diseases, digestive disorders, migraine and allergic conditions are the major causes of absenteeism in Constructit. Obesity related diseases such as hyperlipidemia, high blood pressure, diabetes, and cardiovascular diseases are moderately high for this workforce that consists of 36 percent of men and 43 percent of women. In E-editors, there are 750 men and 840 women with ages 35 to 54 and most of them are married.
For the past ten years, ninety-five percent in the workforce have largely been sedentary; their job involves sitting in front of the computer for long periods of time. Only five percent are required moderate activity. Stress related injury (SRI) and problems with vision were acquired by at least 95 people who had this job for a while. There are no major medical health risks for the 170 men and 182 women (22%) from this group. Respiratory disorder is the 26 percent of the group problem because they are heavy smokers.
There are 720 people who are obese in this group because of the heavy sedentary lifestyles, eating habits, and lack of exercise. This also means that there are increased risk of diabetes, hypertension, high cholesterol and cardiovascular diseases. Plan Analysis Based on the plans, I would recommend Castor Standard to Constructit and not to provide insurance to E-editors. Since Castor Standard does not cover pre-existing conditions, the risks of providing this plan are low.
The premium that Constructit will be responsible annually is $3,428, with Castor Collins Health Plan earning $3. 43 million. Given the health profile and the expected utilization of services for E-editors, I think that not providing insurance is the right decision. There is a high risk of insuring this group and whatever Castor Collins earns from this group are inadequate to cover those risks. The goal is to maximize earnings. If E-editors are willing to pay a different premium they will be considered by providing an appropriate plan that minimized risks and increased earnings.
Risk-averse consumers buy health insurance to avoid losing income or wealth when they are unwell. In other words, consumers pay insurance premium to transfer their risks of medical expenses to the insurance company. The premium that Castor Collins receives is a source of revenue. It is compensation for bearing risk and for bearing expenses such as payment to health care providers. If Castor Collins know that a particular group of enrollees is more susceptible to a particular disorder, its risk for providing coverage for that disorder is higher.
However, if, as in the case of Constructit and E-editors, a group of individuals is not willing to pay a higher premium to cover greater risks, Castor Collins may not be able to provide coverage for greater risks. Therefore, while selecting a plan and the services to provide under that plan, Castor Collins has to weigh various considerations – the premiums that enrollees are willing to pay, the risks of providing a particular plan or service, the expected utilization and hence, the costs, of providing various services in the plan, and the premium Castor Collins needs to charge to maintain profitability.