Economics Issues Simulation Paper Essay

Custom Student Mr. Teacher ENG 1001-04 24 April 2016

Economics Issues Simulation Paper

The purpose of a managed care organization is to coordinate the costs and delivery of health care. A managed care organization oversees money spent on labor, technology, and facilities such as physician offices and hospitals. A type of managed care organization is a Health Maintenance Organization (HMO). A HMO “provides medical care for all its enrollees in return for a fixed annual fee per enrollee” (University of Phoenix, 2010, Key Terms and Concepts Section). An HMO tightly oversees the use of health care services thereby reducing costs and controlling utilization. For example, HMO’s reduce costs and control utilization among services are by requiring second opinions, performing pre – admission testing and reviews for continued stays or additional procedures, and allowing generic substitutions for drugs. Managed care organizations can save money by providing lower prices through contracting large volumes of services and reducing the amount of hospitalizations (Getzen & Allen, 2011).

This essay presents a scenario in which I am a representative of Castor Collins Health Plans responsible for maximizing profits and minimizing risks. Within my job description, I am advised to develop a comprehensive health insurance plan for two entities: ConstructIt and E – Editors. This essay explains the company’s employee demographics, health risk factors, premium amount the company is willing to pay, and what company I chose to offer a health insurance plan. Based upon my analysis of potential utilization, I will provide two reasons for why each plan could be selected as well as explain my reasoning for choosing the plan. Last, I will explain why I did not offer the company a different plan.

ConstructIt Employee Profile

ConstructIt is a construction company composed of 1,000 employees. ConstructIt is [Avoid “it is,” etc.] comprised of 550 men and 450 women between the ages of 26 – 42 with 60% having spouses. ConstructIt employees work profile consist of 32% great physical activity, 25% moderate physical activity, and 43% sedentary activities. The age and gender profile of ConstructIt is as follows: Almost half of the population is between the ages of 26 – 30 years One – third of the population is between the ages of 31 – 35 years Approximately 20% of the population is between the ages of 36 – 40 years Less than 10% ages 41 – 45 years. (University of Phoenix, 2010, Health Profile Section)

The health profile of major risk factors among ConstructIt employees is depicted within the following table:


High Cholesterol
High Blood Pressure
Respiratory Diseases
Digestive Disorders

Thirty – eight percent of the population is diagnosed as having no major health risks.

Economic Issues Simulation

In addition, a combined 18% of the population smokes (University of Phoenix, 2010, Major Health Risks Section). ConstrucIt has a high number of people diagnosed as not having any major health risks. This is good because it means fewer people will seek health care services resulting in saving money for Castor Collins Health Plans. However, ConstructIt does have a high incidence of obesity rates: 39% of the group. Obesity predisposes a person to developing other serious chronic ailments such as high blood pressure, high cholesterol, and diabetes. The high rate of obese individuals may increase the risks involved whenever offering health insurance to ConstructIt.

 Chosen Company and Plan

ConstructIt is willing to pay a maximum premium payout of $4000 per enrollee and E – Editors is willing to pay $4500 per enrollee. However, E – Editors has 600 more employees than ConstructIt, which in turn increases costs and utilization rates. Based upon the health profile of ConstructIt versus E – Editor I have decided to offer ConstructIt the Castor Standard insurance plan because they have lower utilization rates in many areas. I have decided not to offer E – Editor any type of insurance plan through Castor Collins Health Plans because E – Editor has high utilization rates. In addition, E – Editors employee age groups range from 35 – 54 years where as ConstructIt employee age groups range from the ages of 36 to 45 years (University of Phoenix, 2010, Health Profile Section). As a person ages, he or she is much more likely to increase the amount of health care goods and services required to maintain one’s health. In turn, this also increases the expected utilization rates.

Two Reasons For Why Each Plan Can Be Selected

Castor Collins Health Plans contain certain factors affecting the pricing of services. These factors include limitations and exclusions for what Castor Collins is willing to pay. Castor Standard health plan does not cover pre – existing conditions where as Castor Enhanced does provide coverage for enrollees with pre – existing conditions. One reason for why I can offer Castor Standard health plans to ConstrucIt is that the majority of ConstructIt employees are younger in age and almost half the population is free from major health risks. A second reason for why I can offer Castor Standard Insurance plans to ConstructIt is that it costs less while covering more conditions. One reason for why I can offer Castor Enhanced health plans to both ConstructIt and E – Editors is because both companies have employees with pre – existing conditions. A second reason for why I can offer Castor Enhanced health plans is E – Editors contains a larger amount of middle – aged individuals requiring specialized services. Many pre – existing conditions require specialized services that may be added or customized to the Castor Enhanced health plan.


In summary, an HMO works in connection with a group of hospitals, physicians, and providers to offer health care services for a fixed annual fee. HMOs tightly oversee the use of health care services to reduce costs and control utilization. I evaluated the employee work and health profiles of two companies: ConstructIt and E – Editors. ConstructIt contains 1000 employees willing to pay out $4000 in premiums per enrollee each year. E – Editors contain1600 employees willing to pay out $4500 in premiums per enrollee each year. E – Editors’ health profile revealed a higher utilization rate among services than ConstructIt.

Economic Issues Simulation

This prompted me not to offer any health plans to E – Editors at a time whenever Castor Collins Health Plans is trying to maximize profits and minimize risks. However, if E – Editors was willing to pay higher premiums Castor Collins Health Plans may have been able to customize a health plan. I did offer a Castor Standard Insurance plan to ConstructIt because their health profile revealed a lower rate of utilization among services. It is important one evaluates the exclusions and limitations listed within health insurance plans to ensure adequate and correct amount of coverage is available.

Getzen, T. E., & Allen, B. H. (2007). Health Care Economics. Hoboken, NJ: John Wiley & Sons. University of Phoenix. (2010). The Financing of Health Care Simulation [Computer Software]. Retrieved from University of Phoenix, Simulation, HCS440 – Economics: The Financing of Health Care website.

Free Economics Issues Simulation Paper Essay Sample


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  • University/College: University of Chicago

  • Type of paper: Thesis/Dissertation Chapter

  • Date: 24 April 2016

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