Millions of consumers are enrolled in a managed care organization (MCO) model, and the numbers are
expected to increase over the years. In order to control healthcare cost, employers have moved to
managed care health plans as an alternative to fee-for-service plans. In the fee-for-service model,
providers charge a fee for each service or procedure delivered to the patient. Managed care, however,
provides a range of healthcare products and services to consumers in an effort to keep the lowest
possible cost and to help patients avoid serious health problems.
SCENARIO
You are the chief financial officer (CFO) of a nonprofit organization, Seamus Company, and have been
asked to analyze the company’s health insurance plans for any cost-saving measures. You have also been
thinking of innovative ways to help reduce cost, such as leveraging resources through healthcare
partnerships. Healthcare coverage is the sole principal employee-related expenditure for most employers
(aside from salaries). Employers are shifting the healthcare cost to their employees by encouraging them
to think more about health-related expenses and behavior. Employers increasingly offer incentives to
remove spouses from employee plans. Employers may charge workers extra if a covered spouse has
access to other insurance, or they may pay bonuses when spouses are not on the company policy.
Create a report (suggested length 5–8 pages) that includes the following:
- Propose three fiscally sustainable strategies for Seamus Company from the perspective of a CFO,
moving away from a fee-for-service model to a MCO model.
a. Recommend a plan to carry out each of the three sustainable strategies from part A1 by
including the following:
- cost-saving measures
- tax deductible considerations
- other tax advantages
- fiscal management improvements
b. Discuss two financial management principles of Seamus Company that would support your
recommended plan from part A1a.
c. Discuss how the strategies from part A1 align to Seamus Company’s goals of reducing the costs
of the company’s health insurance plans.
- Choose one of the strategies from part A1 to analyze the use of increased service benefits for
Seamus Company by doing the following:
a. Discuss the healthcare utilization risk strategy that Seamus Company may face.
b. Describe three financial benefits to Seamus Company with the implementation of increased
service benefits.
c. Describe three potential financial drawbacks to Seamus Company with the implementation of
increased service benefits.
