Case Study 77

For many companies, health insurance can become a challenge especially for those companies who make small profits trying to exist in today’s economy. That is the case for Quality Auto Parts, a company who has seen its profits from the late 80’s increase and decrease at different variables until today. During the recent recession the decline in auto sales put a damper on the auto parts dealers as well. This did not make things better when the doubling of health insurance benefits continues to rise over the years. Quality Auto Parts put together a health committee to try and figure out a way to help cut there spending on employee health benefits while still being able to appeal to the employee. A very tough task …show more content…

Often they achieve increased morale and productivity because they are seen as an employer who takes care of their employees.
Of course with every option there is a drawback, and in this case, it would be taxes. As with most business expenses, all expenses relating to self-insurance are tax deductible. That is only when losses are paid rather than incurred. In this case the company would have to purchase and annuity policy on behalf of their employees who put in claims, such as workers compensation so they can achieve an immediate tax deduction. This helps incase a workers compensation claim takes years to pay out, then it helps in reducing its losses through this plan.
The fourth option, the option CEO Decarlo agrees with, was the combination of Catastrophic health insurance plans for major medical expenses coupled with a Health Savings Account (HSA) for smaller, more routine healthcare expenses. Catastrophic health insurance plans have high deductibles but the premiums are lower. More people can afford a Catastrophic plan in contrary to traditional health insurance. Lower premiums over the years translate into lower premium increases altogether. Every year health insurance companies increase their premiums, since Catastrophic are cheaper so are the increases.
The huge drawback of this plan, is that you have to pay for all medical expenses until your out of pocket limit is met. This might