Why are health care costs rising so rapidly?

Why are health care costs rising so rapidly?.

1.Why are health care costs rising so rapidly? (23 points) 2. What can Apex do to control costs? (23 points) 3. What guarantee of success is HRG willing to make to Apex? (24 points)

Why are health care costs rising so rapidly?

Part A

The first phase of your consulting assignment is to respond to the president with a detailed answer to each of his three questions.


  1. Why are health care costs rising so rapidly? (23 points)


2. What can Apex do to control costs? (23 points)


3. What guarantee of success is HRG willing to make to Apex? (24 points)

Use material from the text and outside readings to help you formulate your responses.  You may want to search the Internet for additional background information and statistics on the rising cost of health care.

Use APA style when citing sources. Be particularly careful when considering the third question. Your response may well determine whether you get the business, but the overriding question is whether you can ethically guarantee results. Try to be creative as you come up with ways that both HRG and Apex can come out winners in this project.

Congratulations! Your responses to the President of Apex have helped him to understand the complexity of health care issues in America. He now sees that it is very difficult for any single employer to combat effectively the systemic causes of rising health care costs. He also realizes the inability of his internal staff to address the problems and, therefore, reluctantly agrees to the project.


Part B

For the second phase of the project, two of your analysts came on-site to conduct the medical plan audit. After a series of meetings with Apex staff and a review of their plan documents, your analysts found the following about the Apex medical report.




Medical Plan



A fully insured indemnity plan is included.



There is a $200 deductible per family member.



The coinsurance plan includes paying 90% and the employee paying 10%.



The out-of-pocket maximum is $2000 per family member.



The prescription drug plan includes a $5 co-pay for generic drugs and a $10 co-pay for brand name drugs.


6.The company pays 100% of the premium for both the employee and their dependents.

You have had time to review the Apex health plan audit results. Your initial assessment is that it is a very rich plan that puts the entire burden of cost on the company.

Although it does make them unique in their industry and will attract workers, it is not an approach that can continue to be cost justified. The material in your text, as well as the Lecture and Research Updates and the Required Readings, will help you in this evaluation.

You should use Internet resources to research how other companies have responded to these kinds of challenges. The next step in the project is to provide an analysis of each of the plan components listed above. For each one, you are to evaluate the advantages and disadvantages of the current provision and suggest alternatives.

Again, remember to cite all sources used. As you prepare your response, you should consider the following. (120 points) (A 2-page, double-spaced, response is required for each question below).


1. Self-Insured v. Fully Insured Plan:  Would it be in the best interest of Apex to self-insure its plans, using stop loss coverage to limit their liability? (20 points)



Introduction of Managed Care: Are there other forms of a health plan that would be more appropriate for a company the size of Apex?  Consider the use of Managed Care programs. (20 points)



Handling of Deductibles, Coinsurance, and Out-pf-Pocket Maximums: How could Apex use utilization review and case management techniques to isolate high cost areas of the plan? (20 points)


4. Restructure of the Drug Plan:

Prescription drug costs are responsible for a major part of spiraling health care costs.  How might you change the co-pay structure to try to reduce costs? (10 points)



Introduction of Employee Premiums:  What changes would you suggest to restructure the deductibles, co-insurance, and out-of-pocket maximums? (10 points)



Formal Recommendation: It is said that employees will never become prudent users of health care if they don’t have “any skin in the game.” How might you adjust health care premiums at Apex? (20 points)





Once you have finished your evaluation, you should conclude with a formal recommendation to Apex senior management. (20 points)





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Why are health care costs rising so rapidly?


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