The medical cost in America has risen tremendously over the past few decades (Kaplan & Porter, 2011). The high cost has translated into expensive insurance policies. Insurance companies have tried in vain to bring down the costs of such policies; this problem has been linked to the lack of adequate measures to control the rising costs of health care (Orszag & Emanuel, 2010). This study explores the issue of the high cost of care with the purpose of gaining insight into the measures that could be adopted to cut down the costs. The study invokes interviews with both the CEO and the finance manager at Lifetime Healthcare Group insurance.
Lifetime Healthcare Group
Lifetime Healthcare Group is an American health insurance company that has been ranked as one of the best in the country. As stated by the interviewees, about two in every ten patients are affected by the high cost of care. For example, a patient could be required to pay more than 40,000 dollars for the twenty minutes it takes a physician to suture a wound. The financial statements of the company indicate that it spends almost 75% of its collections on healthcare indemnifications (Kaplan & Porter, 2011). The percentage continues to rise as the cost of healthcare increases.
Interview 1: Chief Executive Officer
The CEO was interviewed at the headquarter offices of the Lifetime Healthcare Group to find out the cost of insurance premiums paid by the policyholders. The CEO attributed the high cost of the medical insurance policies to the rising health care costs in the country. He argued that there was little they could do to bring down the cost of care since the authorization lies with the government. However, the CEO cited that they have in the past adopted strategies to bring down the costs of the annual premiums. Nevertheless, his view of reducing the premiums differed from that of the finance manager who thought that such a step would have negative financial implications.
Encouraging a Family Floater
The CEO explained that the organization is supporting families looking forward to being covered under the company to go for a family floater policy in place of individual plans for each member. A family floater ensures every member of a family under a single insurance policy and is cheaper than acquiring a policy for every individual in the family.
According to Kaplan and Porter (2011), a family floater cover is cheaper since only the seniors pay for the policy but it covers both parents and their children. In addition, there is a higher probability of the policy being used as opposed to an individual one, which may not be utilized in the lifetime of the covered individual.
The CEO leaked information that the company is considering introducing a more comprehensive policy that would cover all the family members under one policy. Currently, the family floater policy includes only parents and their children but excludes other close relatives. The CEO argued that extending the coverage to include parents and siblings of the policyholder would go a long way in reducing the effect of the high cost of premiums.
Interview 2: Finance Manager
The finance manager echoed the sentiments of the CEO that the high costs of health care in the US have contributed significantly to the premiums charged by the insurance sector. However, he was quick to explain the strategies the company has adopted to cut down the costs of monthly premiums on policyholders.
Encouraging Basic Plans
According to the manager, the company has introduced cheap individual policies that allow the insured to select a particular arrangement such as a cover against a specific illness or accident. According to him, the cost of such a policy is lower than the general comprehensive ones.
The manager said that they were working on a policy that would see the company offer more concrete plans. One of the strategies entails allowing subscriptions for more than one year so that the amount charged for a 2-year policy will be lower than that charged for a 1-year policy.
Most insurance companies have introduced a 2-year policy to replace the 1-year one as a way of cutting down the cost of insurance (Orszag & Emanuel, 2010). The health insurance policy is usually an annual contract, which means that the cost of premiums must be high because there is no guarantee that the customer will renew the contract (Laughon, 2006). By introducing a 2-year plan, the chances are that the premiums will be lower.
Blocks that the Organization Foresees in Resolving the Issue
Both the CEO and the finance manager recognized the fact that bringing down the cost of insurance premiums is an insurmountable task. This is because the cost of healthcare in the country continues to rise, and there are no indicators that the cost will go down anytime soon. The rising cost of healthcare in the US was, therefore, identified as the main setback towards achieving a low cost of premiums.
The cost of health care has had an increasing trend over the past few decades thus placing a heavy burden on the taxpayers. Insurance companies have also been affected by the high health care costs since they have to overcharge policyholders to keep up with the escalating costs of care. Insurance companies have, however, adopted certain strategies aimed at reducing the cost payable by customers through, for example, introducing more comprehensive policies that cover many family members.
Kaplan, R. S., & Porter, M. E. (2011). How to solve the cost crisis in health care. Harvard Business Review, 89(9), 46-52.
Laughon, D. B. (2006). Health care financial management for nurse managers: Merging the heart with the dollar. Critical Care Nurse, 26(4), 55.
Orszag, P. R., & Emanuel, E. J. (2010). The health care reform and cost control. New England Journal of Medicine, 363(7), 601-603.