Question:
(Cost behavior; cost management; ethics) An extremely important and expensive variable cost per employee is health care provided by the employer. This cost is expected to rise each year as more and more expensive technology is used on patients and as the costs of that technology are passed along through the insurance company to the employer. One simple way to reduce these variable costs is to reduce employee insurance coverage.
a. Discuss the ethical implications of reducing employee health-care coverage to reduce the variable costs incurred by the employer.
b. Assume that you are an employer with 600 employees. You are forced to reduce some insurance benefits. Your coverage currently includes the following items: mental health coverage, long-term disability, convalescent facility care, nonemergency but medically necessary procedures, dependent coverage, and life insurance. Select the two you would eliminate or dramatically reduce and provide reasons for your selections.
c. Prepare a plan that might allow you to "trade" some variable employee health-care costs for a fixed or mixed cost.