Economic Issues Simulation

HCS/440

July 9, 2014
Jonathan Foskett

Economic Issues Simulation

Constructlt is a company, which currently employs 1,000 individuals, 550 men and 450 women in the age group of 26-42. Approximately 60% of the group is married. The group is willing to pay up to $4,000 dollars per individual for their annual premium. Castor Collins must weigh the many considerations when deciding to insure Constructlt, the premiums employees are willing to pay, risks of providing a certain plan or service, and the expected utilization (University of Phoenix, 2014). In order to maintain a profit Castor Collins needs to take all of these aspects into consideration. Thirty-two percent of the individuals at Constructlt have a working profile, which involves significant physical activity, and only 25% have a working profile with moderate activity. When determining which insurance plan is best for Constructlt it is best to look at the health risk factors of the group. Thirty-eight percent of the group, which breaks down to 170 men and 210 women, has no major health risks. Conversely, 18% of the workers, 10% men and 8% of the women are smokers. The principal health risk factor affecting the group is obesity. Of the Constructlt group obesity affects 39% of the group. Hence, increasing the risk for obesity related diseases like high blood pressure, heart disease, and diabetes. Due to the health risk factors utilization will increase with many of the services such as diagnostic imaging, prescription medications, and outpatient physician visits (University of Phoenix, 2014). There are three different plans for Constructlt to choose from, making the right decision for all will be crucial. Castor Collins offers three different insurance plans, which could meet the needs of Constructlt employees, the Castor standard plans, the Castor enhanced plan, and the Castor enhanced minor plan. The Castor standard plan does not cover pre-existing conditions. Even though the plan does not cover pre-existing conditions, it would fit the needs of the Constructlt group due to the group’s low incidence of pre-existing conditions. The cost of the Castor standard plan would meet the groups cost requirement, and would only be $3.428.00 annually. The Castor enhanced plan is the group’s second option. This insurance plan matches the Castor standard plan, but does cover pre-existing conditions. The Castor enhanced plan could be a possible candidate for the group because it would make the most of earnings. This plan would provide full coverage to the entire group, including individuals with pre-existing conditions. Changes cannot be made to the plan for cost savings. Even though the plan cost is higher at $4,428 dollars, the plan would work if the group would be willing go over the $4000.00 maximum. The Castor enhanced minor is the third option. This plan covers pre-existing conditions, can be adjusted to fit the group, and has a lower premium then the previous plan. This plan makes for different services to be removed, so the cost could be lowered. The Castor enhanced minor plan could work for Constructlt by removing some of the services such as obesity treatment in order to make the plan fit the minimum cost of $4000 dollars. The best option, in my opinion for Constructlt and Castor Collins would be the Castor enhanced minor plan. This plan fit the Constructlt groups needs such as, it covers pre-existing conditions, and has many other services that would prove beneficial to the group. By removing the obesity option from the plan, it would lower the cost of the plan, and benefit Castor Collins because of the high percentage of individuals who would use the service making the utilization for the obesity service high. Due to 39% of the individuals at Constructlt being obese, the obesity service would have high incidence of use, which would not benefit Castor Collins. By removing the obesity option the plan total would be $3,943 annually, just under the $4000.00 the group was willing to pay. Keeping the substance abuse option on the plan would be beneficial due to the expected utilization of the service being low. Another add on I decided to keep is the male/female sterilization option was essential and a service which members would expect to receive coverage for. The cost for the male/female sterilization is not very high. Vision and hearing screening are other options that are essential to keep and the expected utilization is not very high. In addition, the coverage for custodial care in not high, and expected utilization is not high. With the Castor enhanced minor plan and the premium of $3,943 Castor Collins will generate $3.94 million from Constructlt. In researching and comparing the different plans I choose not to select the Castor standard insurance plan. Even though the plan has a lower premium it does not cover pre-existing conditions. With the obesity rate at 39%, it is essential that the plan cover pre-existing conditions. I decided not to select the Castor enhanced plan because this plan does not allow for adding and removing services, and the utilization for many of the services would be high. In addition, the premium would be more then Constructlt wanted to pay annually and it would not be profitable for Castor Collins. Due to the high utilization of many of the services that would well exceed the amount Castor Collins would make on the annual premiums from Constructlt. In conclusion, the health care market can be tough to accomplish sound economic decisions in because of all of the uncertainties. Supply and demand can be uncertain, for individuals do not know which health care options he or she will need, and how much of a service he or she will need. A company such as Castor Collins must take into consideration the complete group profile they are to insure. The premium, which Castor Collins receives, is the company’s source of revenue, it is the company’s compensation for bearing expenses and risks such as payment to health care providers (University of Phoenix, 2014). A company has to decide what would be profitable, and cost-effective. Completion in the health care market can cause decision making to be tough, but one wrong decision can cost a company millions of dollars.

References

University of Phoenix. (2014). Understanding Economic Issues for HMOs [Multimedia]. Retrieved from University of Phoenix, HCS/440 website.