Analysis and comparison of Castor standard and enhanced policies

¶ … Castor Std, Castor Enhanced, Castor Enhanced Minor policies Constructit E-Editors.

Economic issues simulation

Castor Collins is currently faced with the need to enhance its presence within the market and, in doing so, it sets out to attract more enrollees. Currently, the company has been solicited to make health care plan offers to two companies, namely Constructit and E-Editors. Each of the companies is characterized by its own traits, which generate the need for different offers.

E-Editors employs a total of 1,600 people, who are willing to pay an insurance of up to $4,500 per year. Constructit employs 1,000 individuals and these are willing to pay up to $4,000 per year for their health insurance plan. In terms of profiles, Constructit is more so populated by younger and healthier employees, who are however faced with higher risks of workplace accidents. In the case of E-Editors, this firm is characterized by a diverse workforce, joined in a sedentary life and work style. This virtually translates into a high obesity rate within the company and as such, high risks for associated diseases, such as diabetes or cardio-vascular diseases.

In a first instance, it would appear that the E-Editor -- with its higher number of employees and their willingness to pay more for insurance -- is the more profitable choice for the health maintenance organization. Nevertheless, their higher risks of diseases associated with obesity also make them riskier. Constructit appears as a safer choice, yet coupled with a decreased rate of profitability. In such a setting then, it appears that an important part in the decision is played by the aversion to risk. A higher aversion to risk would indicate an offer being made for Constructit, whereas a lower aversion to risk would make an offer to E-Editors.

In both cases, the cost of the health insurance is fully covered by the individuals, meaning that the buyers are cost sensitive. At this stage, a possibility would be considered in that of providing personalized health care plans to the employees at the two firms, yet, since the buyers are cost sensitive, it would be difficult to make a profit from such customization. In this setting then, the current recommendation remains that of selecting a specific plan and making the offer to the respective company / companies.

In terms of the actual health care plans, Castor Collins can now choose from three distinctive offers, which one to promote to the prospective customers. These three plans include the following:

Castor Standard, which provides the lowest and most affordable costs for the buyers, yet also a limited coverage. Its primary trait is that it only offers coverage for the conditions incurred after the insurance plan is signed.

Castor Enhances, which also provides health care insurance for the pre-existent conditions of the buyers.

Castor Enhanced Minor, which provides basic care as well as care for the pre-existent conditions, but excludes some precise conditions.

In order to better understand the plans and their applicability, it is necessary to review their pros and cons at the level of three specific categories of stakeholders, namely the patients (insurance buyers), the provider (Castor Collins) and the third party payers. In discussing these pros and cons, emphasis would be placed on the costs of the plan, its quality and the access to it. The table below summarizes the analysis conducted:

Castor Standards

Castor Enhanced

Castor Enhanced Minor

Pros

Cons

Pros

Cons

Pros

Cons

Patient

Low cost

Increased access and affordability

Decreased coverage

Extensive coverage and high quality

Higher cost and decreased affordability and accessibility

Medium cost

Medium accessibility

Risky and partial coverage

Provider

Low risk

Low profitability

Possibility for a higher profitability margin

Higher levels of risk assumed

Balance between risks and profit margin

Decreased profitability

Uncertainty of the risk assumed

Third party payer

Low cost

Increased access and affordability

Increased cost

Medium cost

In a nutshell, each of the three health care plans can be addressed at the level of the impacted stakeholder categories. In this order of ideas, the patients -- insurance buyers and the other individuals covered in the insurance form, such as immediate family members -- perceive the Castor Standard as an accessible package, with a limited coverage however. The Castor Enhanced and the Castor Minor have better qualities, yet also higher prices, being less affordable.

At the level of the providers, the most profitable package is the Castor Enhanced, yet it is also the one which generates the highest risk, as materialization of the risk insured would lead to the company paying large amounts of its profits in medical bills. For both patients and the provider, the Castor Enhanced Minor is a difficult choice, since it integrates too many uncertainties and it could generate results based on hazard.

In the particular case of Castor Collins and its current situation, the formulated recommendation is for the company to make an offer of the Castor Standard for Constructit, and no offer for E-Editors. This decision is based on the following rationale:

E-Editors reveal a high risk due to obesity and obesity related conditions, meaning that the utilization of the insurance package would be intense, to even pose threats for the profitability of the health maintenance organization.