Economic Issues Essay

Castor Collins Health Plans, a regional health maintenance organization (HMO), in the state of Pantome provides HMO health insurance and health care services to enrollees through its statewide network of physicians and hospitals. E-Editors, a company with 1600 employees has asked Castor Collins to find an employee health insurance plan that accepts preexisting conditions at a maximum premium of $4,500 per person. Caster has two plans, which may fit the client’s demands. This paper converses the selection method including risk factors as compared to premiums that the company is willing to pay. In addition, the paper also considers the selection method of Cigna as a comparison to data available for Castor Collins. Economic Issues Simulation Paper Castor Collins Health Plans is a regional HMO founded in 1999 in the state of Pantome (University of Phoenix, 2011). Using a capitation model to pay its network of health providers, the HMO provides health insurance and health care services to enrollees statewide (University of Phoenix, 2011). Caster Collins currently has 100,000 enrollees throughout Pantome and is actively pursuing to increase this number. On January 2006, E-Editors, which comprises 1,600 people, approached Castor Collins with a need for employee health insurance plan. Currently E-Editors does not have health insurance, which means that the individuals will pay for their own insurance (University of Phoenix, 2011). The people at E-Editors are willing to pay a maximum annual premium of $4,500 per person (University of Phoenix, 2011). Caster Enhanced Minor covers preexisting conditions, but risks under this plan are lower than under Caster Enhanced, because this plan covers fewer services (University of Phoenix, 2011). For E-Editors, the premium charged for this plan is $4,491, and earnings are $7. 19 million. Because a good decision made by excluding Vision Screening, Hearing Screening, Male/Female Sterilization, and Custodial Care, the premium paid and the earnings barely cover the risks of insuring the group (University of Phoenix, 2011). If the goal were to minimize risks, one may consider not providing insurance to this group, which would mean a reduction in earnings (University of Phoenix, 2011). By including substance abuse treatment in Castor Enhanced Minor for E-Editors, the costs of providing this service are not too high and a comparison of the expected utilization of this service with average utilization shows that the risk of covering this service is low (University of Phoenix, 2011). Castor Collins has two plans suitable for this company – Castor Standard, which does not cover preexisting conditions, and Castor Enhanced, which covers preexisting conditions (University of Phoenix, 2011). In addition, Castor Collins can mitigate its risk by customizing Castor Enhanced to remove a few services that may have high utilization (University of Phoenix, 2011). Castor Collins might not insure any of these plans if the risks outweigh the profits (University of Phoenix, 2011). E-Editors will pay $4,500 as a maximum annual premium with preexisting conditions covered. Because Castor Standard does not cover preexisting conditions, the choices for E-Editors are Caster Enhanced and Caster Enhanced Minor. Caster Enhanced costs $4,556, which is $56 over the price of $4. 500. Therefore, this choice is not the optimum choice. Moreover, the Caster Enhanced Minor priced at $4,556 is also over the $4,500, but there is the option of electing to exclude some services. This tactic is exactly what E-Editors chose. Vision screening, hearing screening, male/female sterilization, and custodial care excluded from the Caster Enhanced Minor Plan lowering the total cost to $4,491. Thus, this plan covers preexisting conditions, but risks under this plan are lower than under Caster Enhanced, because this plan covers fewer services (University of Phoenix, 2011). For E-Editors, the premium charged for this plan is $4,491, and earnings are $7. 19 million (University of Phoenix, 2011). For E-Editors, the premium charged for Castor Standard is $3,485 and earnings are $5. 8 million (University of Phoenix, 2011). The risks and returns in this plan are low (University of Phoenix, 2011). A comparison of the expected utilization and the returns from providing Castor Standard to this group shows that the risks are quite high, and earnings from this plan are not sufficient to cover them (University of Phoenix, 2011). This plan is not the best choice of plan for E-Editors because one could mitigate risks by providing a different plan or by not insuring the group (University of Phoenix, 2011). Risk adverse customers buy health insurance to avoid losing income or wealth when indisposed (University of Phoenix, 2011). The insurance company in this case Castor Collins bears the risk in return for the premium and takes care of enrollees’ medical expenses (in part or full) when indisposed (University of Phoenix, 2011). The premium that Castor Collins receives is a source of revenue (University of Phoenix, 2011). It is compensation for bearing risk and for bearing expenses such payment to health care providers (University of Phoenix, 2011). If Castor Collins or any other similar company knows that a particular group of enrollees is more susceptible to a particular disorder, its risks for providing coverage for that disorder are higher (University of Phoenix, 2011). Thus, Castor Collins should charge a higher premium for covering that disorder. As in the case of E-Editors, there is a group of people not willing to pay a higher premium to cover greater risks (University of Phoenix, 2011). Therefore, Castor Collins would not provide coverage for greater risks (University of Phoenix, 2011). Castor Collins must weigh various considerations concerning the premium that enrollees pay. For example, these considerations are 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 (University of Phoenix, 2011). For example, Cigna, like Castor Collins, tries to find health plans that fit the needs of the company by evaluating network strength, offering transparency and guidance, offering integrated products and services, and tailoring solutions to the size of the business (The Cigna Advantage, 2011b). Cigna recognizes that companies come in all sizes and face unique challenges and tailors solutions for businesses. Furthermore, Cigna solutions combine effective cost management, health advocacy and award-winning customer service by lowering health care costs, offering easy-to-use plans, improving health and productivity, and enjoying flexibility and choice (The Cigna Advantage, 2011a). Cigna believes in healthy, engaged employees and a healthy bottom line (The Cigna Advantage, 2011c). Improving health is the only sustainable way to lower costs. Cigna can help an organization achieve better overall health – and a healthier bottom line, through (The Cigna Advantage, 2011c): * Exceptional customer experience and engagement * Health and well-being solutions driven by integrated technologies and delivered by caring experts and coaches * Cost management that looks beyond networked discounts and into the future of consistent, high quality, affordable care Caster Collins provides health insurance and health care services throughout the state using an HMO model with capitation to pay its network of health providers (University of Phoenix, 2011). Caster Collins currently has 100,000 enrollees throughout the state and hopes to increase the number. Recently E-Editor approached Castor with a need for a health insurance product without preexisting conditions. E-Editor is willing to pay a maximum annual premium of $4,500 per person. Caster has two products that may fit the bill of which the customized Castor Enhanced Minor with modifications is the best fit for E-Editors.