Healthmaintenance organizations (HMO) play critical roles in providing andorganizing different health care benefits and insurance plans fortheir clients. Insurance firms consider a wide range of factors(including the amount of medical risk factors affecting the wholegroup) when offering different insurance programs (U.S. Center forMedicare and Medicaid Services, 2015). In the present case scenario,Castor is an HMO that provides three health security plans to itsclients. The scenario involves the selection of the most appropriatecustomer between Constructit and E-edits. Constructit will be thebest choice because it does not have any employer funded health careplan, which means that a large number of employees are likely toaccept at least one of the three security plans options offered byCastor. This paper will focus on demographics of Constructit’semployees, health care risk factors, premiums that these employeesare willing to pay, the reasons why each of the three plans could beselected, appropriate plan for Constructit, and reasons for notselecting other plans.
Currently,Constructit has 1,000 employees (550 men and 450 women) who arewilling to pay an annual premium of $ 4,000. It is estimated thatabout 60 % of these employees are married, and the average age of allemployees lies between 25 years and 45 years (University of Phoenix,2013). The 1,600 employees of E-edit, on the other hand, are willingto pay an annual premium of $ 4,500. It is estimated that about 39 %of Constructit are currently suffering from obesity. Obesity leads toother health care complications, including diabetes, hypertension,heart diseases, and hyperlipidemia. These complications will increasethe utilization of different health care services, such as outpatientoffice visits, diagnostic imaging, and prescription medications.
Castoroffers three major insurance plans that will address the needs ofConstructit. First, Castor standard is a plan that does not coverpre-existing conditions and premium charged is $ 3,428. This plancould be a potential option for Constructit because the company hasfewer incidents of pre-existing health conditions (University ofPhoenix, 2013). This plan reduces the risk since preexistingconditions, which can be perceived as preexisting liabilities are notincluded in the bunch of services covered. Secondly, the CastorEnhanced Plan covers similar services to Castor Standard, but itincludes pre-existing conditions. This plan could also be a suitableoption because it would maximize income by covering all groups,including those with pre-existing conditions. The annual premiumcharged for the Castor Enhanced Plan is $ 4,428. In addition, theEnhanced Plan would cover more people, which mean that the riskscaused by highly utilized services would be offset when the premiumis collected from more people. Lastly, Castor Enhanced Minor is aplan that covers pre-existing conditions, it also gives customers theopportunity to select services that should be covered. The premiumcan be adjusted to a level that clients are able to pay, which isaccomplished by eliminating some services, especially the riskiestones.
CastorEnhanced Minor is the alternative that can work best for Constructit.This is because the plan will cover all employees by including thoseare already suffering from some conditions. In addition, the CastorEnhanced Minor gives Castor an opportunity to reduce the risk byeliminating the most critical health care risks from the bundle ofservices that should be covered. For example, Constructit has 39 %preexisting incidents of obesity, which means that eliminatingobesity services will reduce the risk (University of Phoenix, 2013).It would be advisable to include different services (such assubstance abuse, female/male sterilization, hearing screening, andvision screening) that are considered to be Constructit has a lessproportion of employees who are abusing drugs and the cost ofoffering substance abuse-related health care is low. From thesimulation, selecting this plan, including the low cost but highlyutilized services and eliminating the high-risk services will helpCastor make a premium of $ 3.94 million.
Thedecision to avoid the other two options (Castor Standard and CastorEnhanced plans) can be defended with different reasons. Castorstandard would exclude employees with pre-existing conditions, whichwould in turn reduce earnings for Castor. For example, 39 % ofConstructit employees have obesity, which is a large proportion ofpotential customers to be left out. It would be better to accommodatethem, but covers them for less risky services by eliminating theobesity service. Castor Enhanced, on the other hand, would berejected on the grounds that it does not allow Castor to adjust thepremium by removing some services down to a level that clients canafford. In addition, the inclusion of highly utilized and costlyservices might exceed the amount of money that Castor will collect inthe form of premium. This will reduce Castor’s profits earned fromthe new customer.
Inconclusion, Castor should select the Enhanced Minor Plan because itwill allow it to eliminate the services that are highly utilized andexpensive at the same time. This decision will ensure that Castorcovers more people, collects more premiums, and saves more money byavoiding expensive pre-services. Constructit is the customer ofchoice because the company does not operate an employer-paid plan,which gives Castor an opportunity to cover these employees.
University of Phoenix (2013). The financing of health care:Understanding economic issues for HMOs. University of Phoenix.Retrieved April 17, 2015, HCS/440- Economics the Financing ofHealthcare course website.
U.S.Center for Medicare and Medicaid Services (2015). How marketplaceplans set your health insurance premium. U.S.Center for Medicare and Medicaid Services.Retrieved April 17, 2015, fromhttps://www.healthcare.gov/lower-costs/how-plans-set-your-premiums/