Economic Issues For HMOs - Essay Example

As a representative of Castor, I am responsible for analyzing and providing optimal solution to my employer which generates most favorable utilization, maximizes its profits and simultaneously mitigates risks. Client Profile Constructit has an employee headcount of 1000 staff members, 550 males and 450 females, ranging within ages of 26 to 42 and comprising 60% of married people. Highest number of employees, amounting to 406, has ages between 26 and 30 while 314 are between 31 and 35, being second highest.

However, while 53% of males belong to the dominant age bracket of 26 to 30, 43% of women belong to the age group of 31 to 35. 320 of these employees have job description involving rigorous physical tasks while 250 of them only carry out activities requiring moderate physical efforts. 170 males and 210 females have been diagnosed to have no major medical conditions that may contribute to company’s risk profile. However, the fact that 55 men and 36 women are reportedly chain smokers, can be linked to become cause of respiratory difficulties, being one of the major reasons for taking sick leaves, amongst others including physical injuries, allergies and viruses, digestive problems and neural disorders.

Comprising 39% of the total manpower, 198 males and 192 females suffer from obesity and are therefore highly susceptible to conditions like high blood pressure, diabetes and heart-related diseases such as high cholesterol. Analysis of plans The basic measure for checking if an insurance plan is feasible is to ensure a perfect balance between injury liability and insurance cover against it, such that the former doesn’t exceed the latter (Smith, pp. 68). Employees are responsible for paying insurance premiums themselves and Constructit shall not account for any expenses on their behalf.

Given data reveals that personnel are only ready to bear an annual insurance premium not exceeding $4,000. The first plan, Castor Standard doesn’t cover preexisting medical conditions of employees. This plan if implemented is capable of generating cash flows amounting to $3,428 annually for Castor. The costs that shall be incurred under this plan amount to $1,905 and $1,524 relating to inpatient and outpatient services respectively. The second plan, Castor Enhanced provides coverage for preexisting diseases and injuries found amongst employees.

The costs incurred under this plan amount to $4,396 while aggregate earnings are $4,428. This large gap is justifiable due to high risks involved under this plan: Castor is responsible for bearing costs pertaining to preexisting conditions as well and therefore is charging premium as compensation for high risks involved. There is a third plan, Castor Enhanced Minor, which is a mere extension and tailored form of second plan with exclusion of few services that have high utilization. This in turn helps in controlling risks by flexibly adjusting each service and computing its sensitivity on costs incurred and profits earned.

Constructit employees are majorly suffering from obesity and smoking addiction problems and therefore, substantial medical costs are speculated to be incurred in these two areas. Therefore, if two services, substance abuse treatment and obesity treatment, may be removed from Enhanced plan then the company is able to achieve a better balance between earnings ($3,882) and risks or costs incurred ($3,850). As a last resort, if none of the plans seem to be profitable for the company considering the