Arc Electric employees were choosing for their wellness insurance program. Arc Electric had expanded their work force due to which more employees were inscribing for Bluefield’s wellness insurance program for the benefits. But when Bluefield released that the use of their doctor services had enormously increased in the last 6 months because of which their net incomes were being affected. they had to happen out the cause for this.
Soon they realized that the chief cause for the addition in the use of their doctor services was the addition in the figure of new employees who were choosing for the wellness insurance program. Exhibit 1 clearly shows that the figure of Arc Electric employees utilizing Bluefield’s Health insurance program has increased from 3912 in July. 2006 to 4137 in August. 2006. Therefore. in merely one month the addition has been of 225 people. which is relatively rather high.
Besides. in 2006. the sum cost incurred by Arc Electric for inmate and outpatient infirmary services were 203425 and 182440 in July and 212250 and 180700 in August. and for surgical services were 101250 and 103400 in July and August. Therefore. the entire cost incurred for infirmary services and surgical services were 487115 and 496350 in July and August. While on the other manus the sum cost incurred by Arc Electric for visits to physician’s office was merely 337900 and 391450 in July and August.
Therefore we can see that the difference is about of 147215 and 104900 in July and August. As Bluefield’s contract with Arc Electric was about to run out the following month. they had to renegociate the footings in their contract with Arc Electric and petition for an addition in their premium rate in order to keep their net income. They had realized that the chief ground for their eroding of net incomes was the increasing figure of Arc Electric employees who had opted for their wellness insurance program.
But. Bluefield were besides cognizant of the fact that during renegotiations if they tried to increase the fixed premium which they charged every employee of Arc Electric per month. so they may decline to make any longer concern with them and subscribe a contract with some other wellness insurance company. This. Bluefield was non ready to put on the line. Thus. Bluefield wanted the staff members and managers to invent a renegotiating scheme which they could show before Arc Electric and keep their contract with them while at the same clip see to it that their profitableness remains at par.
After much consideration and consequences from assorted surveies. including Exhibit 1. the employees of Bluefield realized that merely by increasing their copayment charges they will non be able to convey about a lessening in the figure of physician visits since people do non really like to see the doctors but instead do it in order to stay healthy and fit. The lone manner they can cut down their costs is by paying less to their wellness attention suppliers. like the doctors.
Therefore. they foremost needed to negociate with the doctors and inquire them to diminish the costs of services supplied by them. If they merely asked the doctors to take down their cost of service by around 10 % or 25 % they might make it with the fright that they may free all of their patients and besides be left out of Bluefield’s wellness insurance program. But this may hold certain negative effects as in return of a lower fee per visit the doctors may besides decrease the quality of attention that they give to their clients. This is the ground why Bluefield required a farther analysis of doctors visit.
Out of the $ 250 fixed premium that Bluefield charged each employee of Arc Electric every month. the entire premium gross was portioned out as 55 % for the infirmary and surgical services and 30 % for the physician visits. Therefore while $ 137. 5 went for the infirmary and surgical services merely $ 75 went in for the physician visits. Therefore for every premium collected. the profitableness of infirmary and surgical services was about $ 62. 5 more than the profitableness of the doctor services. Therefore. when compared to physician’s services. infirmary and surgical services have a profitableness of about 45 % more than the former.