Design of Health Insurance Policies

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.

Post a cohesive response to the following:

Analyze 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.

Support your response by identifying and explaining key points and/or examples presented in the Learning Resources.

Read a selection of your colleagues' postings. Consider how your colleagues’ postings relate to the information presented in the Learning Resources and to your own posting.