HCS 440

Economic Issues Simulation

University of Phoenix, Axia

Date: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Instructor: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Economic Issues Simulation: Constructit

Constructit is a company that currently does not have any employer paid health insurance. This company consists of 1,000 people and they are willing to pay up to $4,000 per person for their annual premium. The group of people is compromised of 550 men and 450 women ranging in age from 26 to 45 years old. Fifty-seven percent of the workers range from high activity to moderate activity level while the remaining forty-three percent are in predominately sedentary positions. One factor to consider when determining which type of insurance to offer the group is the amount of health risk factors that affect the entire group of people. Thirty-eight percent of the workers have been determined to have no major risk factors at all. However; almost eighteen percent of the workers are smokers and 13.50 percent of them suffer from some type of respiratory disease or illness. One of the biggest risk factors affecting this group of people is obesity. Obesity affects thirty-nine percent of these workers which increases the risk for obesity related diseases and illnesses. These can include heart disease, hypertension, hyperlipidemia, and diabetes. This will increase the utilization of many healthcare services including prescription medications, diagnostic imaging and services, and outpatient office visits (University of Phoenix, 2010).
Castor Collins offers several different insurance plans that could be used to meet the needs of Constructit. The first plan is the Castor standard plan. This plan does not cover preexisting medical conditions. This plan could work for Constructit because they have a low incidence of preexisting medical conditions and diseases. The premium charged for this plan would be $3,428 which is lower then the maximum amount they are willing to pay.
The second option is the Castor Enhanced plan. This plan is similar to the standard plan except it covers preexisting conditions. This plan would work because it would maximize earnings and lower risks by being offered to Constructit. It would provide coverage to the entire group, even those that are suffering from respiratory conditions and/or obesity related issues. The cost for the care provided to those that have the preexisting conditions could be offset by the high amount of people that are completely healthy and are still paying slightly higher premium at $4,428. However; the only way that this could work is if the group could be convinced to increase the amount of money they are willing to pay by $428 dollars for the coverage of preexisting conditions.
The third option would be Castor Enhanced Minor. This plan offers the same coverage for preexisting conditions as the Castor Enhanced; however it does allow for different services to be removed in order to minimize cost. The plan would work for Constructit because the premium could be adjusted by removing services to fall under the $4,000 maximum the group is willing to pay. It would still cover services the group would expect it to cover such as male/female sterilization, custodial care, and vision and hearing screenings.
The option that I feel works best for Constructit and Castor Collins would be the Castor Enhanced Minor plan. This plan would cover the entire group; even those with preexisting conditions. It is less risky then offering the Castor Enhanced plan because it can be adjusted to offer less services. For example it would be beneficial to Castor Collins to remove the obesity treatment services option from the policy. This service would have a high incidence of usage due to the fact that thirty-nine percent of the group members suffer from obesity. This will save money for Castor Collins because the amount of premium the group is willing to pay would be exceeded by the cost for services related to obesity. I would include substance abuse treatment in the plan because due to the health profile of the group utilization of this service would be low considering only eighteen percent of the employees smoke. I would definitely include the vision screening, hearing screenings, and male/female sterilization services. The cost for these services is low and these types of services are expected to be included in any healthcare insurance plan. Eliminating low-cost services like these would cause people to decide not to enroll in the coverage and therefore the company would be loosing money. I would also choose to include custodial coverage within the plan. This coverage for this service is not expensive and the amount of utilization is low. Choosing this plan with the inclusion of vision and hearing screenings, male/female sterilization, and custodial care and the removal of obesity treatments and services would allow Constructit to be charged a premium of $3,943. This is just under the maximum amount they are willing to pay of $4,000 annually. With this plan and premium amount Castor Hall will make $3.94 million dollars from Constructit. This would be a very profitable decision for Castor Hall.
I would not select the Castor Standard insurance because it would not be able to provide coverage for the whole group. It does not cover preexisting conditions and with an obesity rate of thirty-nine percent the incidence for preexisting conditions would be high. I would not choose the Castor Enhanced plan because it does not give the option of adding/removing services. With all the services offered through this plan the amount of premium Constructit is willing to pay would not be profitable for Castor Hall. The high utilization of some of the services would exceed the amount of money they make on the annual premiums. In conclusion, economic decision making in the healthcare market is very difficult considering there are so many uncertainties that affect the process. When it comes to supply and demand it can be very uncertain in that patients cannot predict when and how much healthcare they will need and physicians cannot always be certain about the outcomes from treatments. A company like Castor Hall has to take the complete profile of the group to be insured and decide what would be the most cost-effective and profitable plan to offer. They want to make sure that the company is happy with the services offered, however; they have to make sure that the company will not suffer a financial loss with the amount of premiums that are being offered to pay. With the amount of competition that is in the healthcare market one bad decision can cost millions of dollars.

References
University of Phoenix. (2010). Understanding Economic Issues for HMO's [Computer Software]. Retrieved from University of Phoenix Simulation, HCS/440- Economics the Financing of Healthcare course website.

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