Financial Status of Seamus Company
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.
A. Create a report (suggested lengtH 5-8 pages) that includes the following:
1. 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
• fisl 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.
2. 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. Descrbe 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.
d. Explain how an employee’s increased usage of these service benefits can be beneficial to Seamus Company.
3. Analyze external healthcare partnerships and their financial benefits by doing the following:
a. Discuss two financial benefits from external healthcare partnerships.
b. Discuss two financial drawbacks from external healthcare partnerships.
c. Determine whether an external healthcare partnership would be beneficial for Seamus Company.
i. Justify your determination of whether an external healthcare partnership would be beneficial for Seamus Company.
Financial Status of Healthcare Organization
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Financial Status of Healthcare Organization
A1. Propose three fiscally sustainable strategies for Seamus Company from the perspective of a CFO, moving away from a fee-for-service model to an MCO model.
Strategy 1
The CFO should adopt the PPO medical insurance plan. PPOs are a popular choice for people looking for health insurance. Doctors and hospitals in the PPO only treat members of a specific company or group of employees. The company can implement this type of insurance as an organization as it is legible for the plan. The doctors in the network will offer discounted prices to all employees in the company, regardless of whether or not they are policyholders or sponsors.
In contrast to other types of insurance, in this one, the employees would not need a recommendation from a primary care physician to see a specialist under this plan. Employees will always select a doctor who is not part of the accredited providers, even though doing so will likely result in a significantly higher bill for their medical care. However, selecting a doctor from the approved list of providers' networks typically has the benefit of a significantly lower price.
Strategy 2
The CFO can implement an HMO medical insurance plan. A health maintenance organization, also known as an HMO, is an organization that offers a way to take care of the health care requirements of an entire workforce or membership at a reduced cost by negotiating with particular medical professionals, hospitals, and clinics. To take advantage of the more affordable premiums offered by the medical insurance plan, the employees of the Seamus Company will use the services offered by the specified providers. If the employees have an HMO plan, they will have the least amount of flexibility, but they will also likely have the smoothest time dealing with claims because the network will take care of putting in the claims for them. The company will be required to pay a set monthly fee regardless of how much care the individual receives because the service is usually pre-paid. Medical visits, hospitalizations, and surgeries are all covered under their health insurance plan.
Strategy 3
The CFO can also affect the POS medical plan. This type of plan combines elements of both the HMO and PPO types of insurance. Employees need to be referred by their primary care physician to see a specialist. Members who opt to receive care from outside providers will be responsible for paying a higher deductible and a more expensive copayment. The POS system enables more significant levels of customization. If one sees more than one doctor or specialist, they can come from inside or outside the network. However, the primary care physician does not need to permit one to make this decision. On an annual basis, out-of-pocket payments will be typically kept to a minimum by the company.
A1a Recommend a plan to carry out each of the three sustainable strategies from part A1 by including cost-saving measures, tax-deductible considerations, and other tax advantage fiscal management improvements.
PPO
PPO may not save as much as some, but they may help a CFO save on managed health care for his employees. In terms of care, cost savings are more apparent with PPO. Savings is significant when physicians' fees for hospital treatments and other benefits are not included. Companies such as Blue Options HSA can reduce the burden of rising cost-sharing on employees by offering them tax-advantaged savings opportunities. With Blue Options HSA, Seamus Company can contribute a more significant share of the total cost of their health care, but this cost-sharing can be offset by tax savings, making it a more attractive option for the company. Therefore, the organization will be exempted from paying taxes on its savings, interest earnings, and purchases.
HMO
The most significant advantage of having an HMO is the savings it provides. Although the company may be required to cover up to 90 percent of the costs associated with HMOs, the premiums for these plans are far more affordable than those for traditional insurance. HMOs, determine the fees that providers can and cannot charge for their services. The excessive expenditure and trips to the doctor and outrageously high expenses for regular services are eliminated. Seamus might benefit from a reduction in the copayments required for the services they obtain. In most cases, the Internal Revenue Service exempts health maintenance organizations from paying income taxes at the federal level. If this were the case, the Seamus Company would be eligible for additional benefits, such as increases in private funding and reductions in operating and material expenses.
POS
As a result of the limited number of options they provide, POS plans are more affordable than PPOs. The company can try to implement POS plans that meet the requirements for both high-deductible health plans (HDHPs) and Health Savings Account (HSA) eligibility. Pre-tax cash can be used to pay for eligible medical expenses if the CFO conducts this planning. In most cases, using an HSA can save up to 30%, depending on the situation. HSA contributions can provide health insurance benefits for employees, paid by the company payments. That is an intelligent method to reduce healthcare costs.
A1b. b. Discuss two financial management principles of Seamus Company that would support your recommended plan from part A1a.
Principle 1. Formulating a Benefits Plan Program
The best way to choose and develop medical cover benefits based on the wants and needs of employees is for the CFO to undertake a needs assessment. Needs assessments may include a look at how a Seamus Company views employee benefits, the benefits practices of competitors, and the tax rules and regulations that apply.
Principle 2. Identify the organization's budget and goals
Identifying the program's goals is a critical first step for the CFO in establishing an employee benefits plan. This principle will serve as a general guide for selecting and designing the benefits program for the company. The design and selection of the benefits package will provide guidelines.
A1c.Discuss how the strategies from part A1 align ...