Case Scenario:
Health insurance is designed to protect patients from the risk of expensive medical services. The cost of insurance, however, is steadily rising. When costs are too high, healthier individuals tend to not purchase insurance coverage, resulting in a lower percentage of healthy individuals to pool with those who have health issues. This poses a challenge for employers and the government, as they are tasked with designing viable policies that balance cost and generosity of benefits. For this Discussion, examine the following scenario and consider the type of insurance policy the employer should design and provide for employees.
Scenario: You are the employee benefits manager for a mid-sized construction company with 50 employees. You are responsible for working with insurance companies to design a health insurance policy to meet your company's needs. An analysis of the health risks of your company's employees indicated that there are two populations of typical individuals: 20 to 30 year-old workers with no known health issues and 40- to 50-year-old workers with chronic diabetes. Assume that 40% of the employees fall into the second category of workers with chronic diabetes.
To prepare for this Discussion, analyze the provided scenario.
- What is the obligation of the employer and the government in insuring these two populations of individuals?
- How do moral hazard and adverse selection impact these insurance provisions?
- Consider the type of insurance policy the employer should design and provide for its employees. Be sure to consider type and generosity of coverage, premiums, deductibles, and cost-sharing.
- An analysis of the obligations of the employer and the government in insuring the two populations of individuals described in the scenario.
- Evaluate the impact of moral hazard and adverse selection on these insurance provisions. Then, recommend the type of health insurance policy the employer should design and provide for its employees. Defend your recommendations.
Zelman, W. N., McCue, M. J., Glick, N. D., & Thomas, M. S. (2014). Financial management of health care organizations: An introduction to fundamental tools, concepts and applications(4th ed.). San Francisco, CA: Jossey-Bass.
Chapter, "Provider Payment Systems" (pp. 579-616)
Baicker, K., & Levy, H. (2015). Cost sharing as a tool to drive higher-value care. JAMA Internal Medicine, 175(2), 399-400.
Cost sharing as a tool to drive higher-value care by Baicker, K., & Levy, H. in JAMA Internal Medicine, 175(2). Copyright 2015 by American Medical Association. Reprinted by permission of American Medical Association via the Copyright Clearance Center.
Khullar, D., Chokshi, D., Kocher, R., Reddy, A., Basu, K., Conway, H., & Rajkumar, R. (2015). Behavioral economics and physician compensation-Promise and challenges. New England Journal of Medicine, 372(24), 2281-2283. Retrieved from
https://www.nejm.org/doi/full/10.1056/NEJMp1502312