Use the information below to answer questions a. through c. and ultimately make

Question

Use the information below to answer questions a. through c. and ultimately make a prediction about which insurance option is likely to be selected by Consultants, Inc., a family-run business with 68 employees, providing anesthesia services on “as-needed” basis to hospitals and ambulatory surgical centers in a large metropolitan area. Consultants, Inc. has been in business for 8 years, offering one generous health insurance plan and sponsoring 60% of premium contribution ($2,900) for each of the 49 employees that chose to participate. Their plan, however, will not meet the minimum essential benefits requirements under the PPACA, and after January 1, 2014 the firm will face the following choices: Option 1: No insurance. The firm will face fines: $2,000 per each employee, starting with the 31st worker Option 2: Better Insurance: purchase a conforming plan through the health benefits exchange. Estimated cost per employee (60% contribution toward the total premium of $6,000) is $3,600, 57 employees are expected by the firm to participate. Option 3: Old insurance Since it is likely that at least one of the workers who cannot afford this insurance will try to obtain it through the exchange, the employer is likely to face the same fines as in Option 1, in addition to paying part of the premiums for participating workers. a) What will be the estimated cost of Option 1: not offering insurance at all? b) What will be the estimated cost of Option 2: purchasing a conforming plan through the exchange? c) What will be the estimated cost of Option 3: staying with the old insurance?

Explanation / Answer

a) estimated cost of option 1: Employer contribution shall be nil & it is going to be charged a penalty starting with 31st worker, 37*2000 = 74000

b) Cost of option 2: Employer contribution shall be 57*3600 = 205200

c) Cost of option 3: Employer contribution shall be 49*2900 = 142100; Penalty shall be 37*2000= 74000, cost to the employer totalling 216100

Option 1 shall be cheaper for the company and option 3 shall be the costliest one.

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