Research Reports from the Department of Operations
Document Type
Dissertation
Publication Date
1-1-1981
Abstract
Rising expenditures on health care in the United States have been a concern for the last few decades. Despite numerous regulatory efforts and concerns expressed by labor unions, employees, and other consumers, health care costs have continued to rise at a rate higher than overall economic inflation. In this thesis, attention is primarily focused on the optimal design of employee group health insurance plans and programs, where annual premiums constitute approximately 25% of a $200 billion industry. It is well established that consumer cost-sharing (deductibles, coinsurance, etc.) plays a dominant role in the utilization of medical care services. Using that fact, empirically testable postulates have been made regarding the variation of expenditure distribution parameters with respect to the benefit plan provisions of an insurance policy. These variations have been used to define and analyze an optimal insurance policy from the cost perspectives of both employees and insurers. Additionally, the "safety-first" risk aversion criterion of the insurer is taken into account. It has been shown that changes in the expenditure distribution due to increased cost-sharing occur in such a way that savings in the employer's (or insurer's) premiums are at least as large as the employee's extra out-of-pocket expenses. In the context of an employee group health insurance policy, this makes it feasible for the employer to offer part of the savings in premiums as an incentive reward to offset the extra costs incurred by the employees. The algorithm has been coded, and the program can be used interactively by both management and the labor union, either before or during health insurance negotiations. It has been shown that such an "incentive reward" policy, which already exists in a school system in California, has the potential to make health services more cost-effective for the employer, employees, and society in general. Finally, the need for better data has been emphasized. There are also suggestions for future research in this area—particularly multiperiod extensions of the model and an experimental setup to analyze the health insurance bargaining problem using multidimensional scaling analysis.
Keywords
Operations research, Utility theory, Integrated delivery of health care--Decision making, Health Care Costs--United States, Health insurance--United States, Health services administration
Publication Title
Dissertation/Technical Memorandums from the Department of Operations, School of Management, Case Western Reserve University
Issue
Technical memorandum no. 487 ; Submitted in partial fulfillment of the requirements for the Degree of Doctor of Philosophy.
Rights
This work is in the public domain and may be freely downloaded for personal or academic use
Recommended Citation
Chaudhuri, Durjoy Kumar, "Design of Corporate Health Benefit Plans: A Decision Theoretic Approach" (1981). Research Reports from the Department of Operations. 144.
https://commons.case.edu/wsom-ops-reports/144