Ethics Dilemma: Go with the High-Deductible Health Plan
The employee benefits staff at auto parts manufacturer Simpson Automotive is preparing estimates of the costs of health plans that will be offered soon. Most options will be substantially more expensive because employees and family members received health care. The higher priced options include the fee-for-service plan, the HMO, and the PPO plans. Only the price of the high-deductible plan will remain the same.
The team of employee benefits analysts completed their evaluation in time for meeting with Yufei Wang, director of Human Resources, to discuss pricing. Lead analyst Nolan Hedrick announced that the total insurance costs will be 15 percent higher next year. He went on to explain that the cost estimate assumes that employees will remain in their current plans. Finally, Nolan indicated that 90 percent of employees are enrolled in the costly fee-for-service, HMO, and PPO plans because out-of-pocket costs are much lower than for the high-deductible plan.
Yufei anxiously replied, saying that the employee benefits budget for next year will be cut by 10 percent and, consequently, the higher health insurance costs are unsustainable. Nolan indicated that the best possible prices were negotiated with the insurance companies, but high employee utilization led to higher prices. Yufei pondered the cost concerns and came up with a solution: Encourage employees to switch to the high-deductible plan in exchange for a $1,000 bonus and those who do not will forfeit receiving a bonus and cost-of-living pay increase, the first offered after a five-year pay freeze.
Question:
1. Why do most employees prefer the HMO or PPO over a High Deductible plan? Are there some employees that may prefer the High Deductible (if so, what characteristics define those employees)?
2. Do you think Yufei's plan is an ethical thing to do? Why or why not? Consider both the employer's and employee's perspectives.
3. What other options would you recommend Yufei consider that could help lower the overall employee benefits budget despite increasing costs for the health care plans?
Sample Solution
1. Many employees prefer the HMO or PPO plans over a high deductible plan because they offer more comprehensive coverage and lower out-of-pocket costs. In contrast,
with a high deductible plan, members have to pay higher deductibles before their insurance kicks in, meaning that they are likely to be liable for more of their medical expenses than they would with an HMO or PPO plan. With this being said, there may be some employees who still prefer to go with the high deductible plan due to its lower premiums and/or tax advantages. These employees may be relatively healthy and young with lower medical needs; thus, opting for a higher risk in exchange for potentially saving money overall.
2. Yufei's proposed solution is controversial because it could be seen as exploiting employees in need of health care services by offering them less incentive than those willing to switch plans. Therefore, it can be argued that such an approach is unethical from both the employer's and employee's perspectives since it takes advantage of those unable or unwilling to make a change due to heavily relying on their current Plan B insurance coverage (e.g., fee-for-service). A better solution could involve reducing the cost of existing health plans by negotiating better rates with health insurers or changing how physicians are reimbursed for certain procedures so that patients don't incur unnecessary costs associated with such services (e.g., reduce prescription drug prices).
3. One alternative option Yufei should consider is increasing cost transparency among providers so that patients know exactly what treatments will cost them prior to receiving care - thereby reducing surprise bills at the end of service provision which puts additional financial strain on individuals using these healthcare services regularly.. Additionally, Simpson Automotive should consider incentivizing wellness behaviors among its workforce through programs like gym membership discounts or discounted preventive screenings like mammograms and colonoscopies - which often come at no cost when done as part of preventative care measures aimed at catching diseases early on rather than after symptoms become too severe.. Finally, Simpson Automotive might pursue bundled payment options whereby hundreds/thousands dollars are paid upfront per patient visit rather than paying separately many times throughout treatment length - resulting in reduced administrative costs associated wih tracking each individual billable item along a lengthy course of treatment.. Furthermore, bundling payments helps control unnecessary utilization by providing incentives for providers do stick to medical guidelines during treatments