Week 3 Discussion Response- Healthcare Finance

Week 3 Discussion Response

Healthcare Finance

Colleague 1

Aisha Brinkley-Flowers

Semoine Brinkley-Flowers 

In this scenario, the employer is responsible for offering equitable, comprehensive health insurance that pools risk across both younger, healthier employees and older employees with chronic diabetes. Employer-sponsored insurance functions as a risksharing mechanism that spreads predictable medical costs across the workforce and reduces individual underwriting (Getzen & Kobernick, 2022). Because 40% of employees fall within the 40–50 age group and have chronic diabetes, the employer must ensure that the plan includes robust chronic disease management, preventive services, and affordable access to medications. This obligation supports workforce productivity and aligns itself with managed care principles.

The government’s obligation is to establish regulatory protections, such as essential health benefits, nondiscrimination rules, and pre-existing condition protections, while providing safetynet coverage for individuals whose income or employment status limits access to employer-sponsored insurance. Federal reforms such as Medicaid expansion and marketplace subsidies aim to reduce adverse selection and stabilize insurance markets (Frederick et al., 2022). Thus, government oversight ensures minimum coverage standards, while employer plans operationalize those standards within the workplace.

Impact of Moral Hazard and Adverse Selection

Moral hazard occurs when insured individuals increase their use of healthcare services because their outofpocket costs are reduced. Younger employees may overuse lowvalue services if cost-sharing is too low, while older employees with diabetes may increase utilization of necessary chronic care. Research demonstrates that tiered cost-sharing can reduce spending while preserving access to essential services by steering patients toward highvalue providers (Ackley, 2022). Therefore, moral hazard should be managed through valuebased insurance design (VBID) rather than high deductibles alone.

Adverse selection occurs when individuals with higher expected healthcare costs disproportionately enroll in more generous plans. Employer-sponsored insurance mitigates this risk because enrollment is tied to employment rather than individual health status. However, offering multiple plans with significantly different benefit levels can reintroduce adverse selection, as higherrisk employees may choose richer plans (Pardo, 2019). To avoid this, the employer should maintain a single comprehensive plan or ensure that any plan variations are modest and actuarially balanced.

Role of Social Determinants of Health in Insurance Design

Social determinants of health (SDOH) including income, education, transportation, and access to healthy food directly influence employees’ ability to use their insurance benefits. For employees with diabetes, access to nutrition counseling, diabetes education, and transportationfriendly options such as telehealth is essential. Narita (2023) emphasizes that insurance design significantly shapes healthcare consumption patterns, particularly among lowerincome individuals who may delay care when cost-sharing is high. Therefore, the employer must design a plan that minimizes financial barriers to highvalue care and supports chronic disease management through integrated services.

Recommended Employer Health Insurance Policy

For a construction company, where the workforce often includes younger, healthier employees alongside older workers with chronic conditions, a strong managed care option is a High-Deductible Health Plan (HDHP) paired with a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA). This structure provides cost control for the employer while offering employees taxadvantaged savings for medical expenses. When paired with Value-Based Insurance Design (VBID), the plan can maintain affordability for highvalue services even within a highdeductible framework.

The VBID Center (2020) emphasizes that VBID lowers or eliminates cost-sharing for highvalue services—such as preventive care, chronic disease medications, and diabetes management—while maintaining higher cost-sharing for lowvalue or discretionary services (VBID Center, 2020). This approach aligns with evidence that tiered cost-sharing preserves necessary care while reducing unnecessary utilization (Ackley, 2022).

Key components of the recommended plan include:

· HDHP + HSA/HRA

· Allow employees to save pretax dollars for medical expenses.

· Provides employer flexibility and cost predictability.

· Encourages price sensitivity for lowvalue services.

· VBID overlay

· $0–low copays for diabetes medications, A1c testing, retinal exams, and preventive services.

· Reduced cost-sharing for highvalue chronic disease management.

· Higher cost-sharing for lowvalue or discretionary services.

· Moderate premiums with employer covering ≥70–80%

· Ensures affordability and broad participation, reducing adverse selection.

· Integrated chronic disease management

· Telehealth, nutrition counseling, diabetes education, and wellness programs.

This design aligns with managed care principles described by Getzen and Kobernick (2022) and supports risk management strategies outlined by Pink and Song (2020). It also addresses SDOH by reducing financial barriers, simplifying benefit navigation, and supporting chronic disease management for the higherrisk employee group.

References

Ackley, C. A. (2022).  Tiered cost sharing and health care demand.  Journal of Health Economics, 85. https://doi.org/10.1016/j.jhealeco.2022.102663

Frederick, J. D., Fung, D. W. H., Yang, C. C., & Yeh, J. J. H. (2022). Individual health insurance reforms in the U.S.: Expanding interstate markets, Medicare for all, or Medicaid for all?  European Journal of Operational Research, 297(2), 753–765. https://doi.org/10.1016/j.ejor.2021.06.022

Getzen, T. E., & Kobernick, M. S. (2022).  Health economics & financing (6th ed.). Wiley.

Narita, R. E. (2023). Consumption of healthcare services in the United States: The impact of health insurance.  Journal of Risk and Financial Management, 16(5), 277. https://doi.org/10.3390/jrfm16050277

Pardo, C. (2019). Health care reform, adverse selection and health insurance choice.  Journal of Health Economics, 67. https://doi.org/10.1016/j.jhealeco.2019.07.001

Pink, G. H., & Song, P. H. (2020).  Gapinski’s understanding healthcare financial management (8th ed.). Health Administration Press.

VBID Center (2020).  Narrow networks and value-based insurance design. University of Michigan V-BID Center. https://vbidcenter.org/narrow-networks-and-value-based-insurance-design/

Colleague 2

Stephanie Tantoh

This report examines the respective responsibilities of employers and the government in providing health insurance, with particular attention to company employees and low-income community members.

Employer and Government Obligations

1. Employer Obligations:

· Provision of Health Insurance: Under the Affordable Care Act (ACA), employers with 50 or more full-time equivalent employees must offer health insurance to their employees or pay fines. Employers must provide a plan that is affordable and covers basic health care needs.

· Health and Safety Regulations: Employers must keep the workplace safe, which affects employees' health and the number of insurance claims.

· Wellness Programs and Education: Employers can improve employee health and reduce healthcare costs by providing programs that promote healthy habits and active living.

1. Government Obligations:

· Regulation: The government controls the health insurance market to ensure people can get affordable coverage and are not treated unfairly because of pre-existing health conditions (Ahanwa et al., 2025)

· Safety Net Programs: The government offers Medicaid for low-income people and Medicare for older adults. These programs help lower healthcare costs for those who cannot afford insurance.

· Public Health Initiatives: Governments also need to promote public health through programs that focus on long-term illnesses, vaccinations, and preventive care.

Impact of Moral Hazard and Adverse Selection

1. Moral Hazard:

· Moral hazard happens when people act differently because they feel protected from risk. For example, if employees have full health coverage, they might use more healthcare services than necessary, such as extra doctor visits.

· Employers can reduce moral hazard by adding costs, such as copayments and deductibles, thereby encouraging employees to use healthcare services more carefully and responsibly (Cogan Jr, 2025).

2. Adverse Selection:

· Adverse selection occurs when people with higher health risks are more likely to obtain insurance, resulting in an uneven distribution of insured individuals. For example, healthier employees might skip health plans if they think the cost is too high, leaving mostly higher-risk employees enrolled.

· To prevent adverse selection, employers should design health plans that appeal to different employees by offering wellness programs, rewards for healthy habits, and several plan choices.

Recommended Health Insurance Policy

Drawing from this analysis, employers are encouraged to create a  comprehensive, tiered health insurance policy featuring the following elements:

1. High-Deductible Health Plan (HDHP) with Health Savings Account (HSA): This option has lower monthly costs and lets employees save tax-free for future healthcare expenses, encouraging saving and careful spending on healthcare.

2. Preventative Care Focus: Services such as health screenings and vaccinations should be fully covered, with no cost to employees, to encourage them to use these preventive services.

3. Wellness Programs: Provide activities that encourage exercise, support mental health, and help manage long-term illnesses. Give rewards like gym memberships or health coaching for joining.

4. Sliding Scale Premiums: During enrollment periods, offer plans with premiums that change based on income to help lower-income employees or community members afford good coverage.

Addressing Social Determinants of Health

The recommended health insurance policy tackles social determinants of health (SDOH) through several targeted strategies:

· Economic Stability: Different plan levels with HDHPs and HSAs help employees control healthcare costs and keep money saved for health emergencies.

· Education Access and Quality: Wellness programs should teach employees about healthy habits and how to manage healthcare costs wisely.

· Health Care Access and Quality: The comprehensive health plan, including preventive care, helps employees access important services that improve their healthcare.

· Social and Community Context: By launching community wellness programs, employers can support low-income individuals, creating a comprehensive healthcare approach that benefits both employees and the community.

In conclusion, a carefully designed health insurance policy that promotes smart use of services and includes health education helps employers create a healthier workplace, fulfill their duties, and better support employees.

Reference:

Ahanwa, E. S., Ikeatu, E. G., & Okeke, D. C. (2025). LEGALLY INCREASING ACCESS TO HEALTHCARE IN NIGERIA THROUGH COMPULSORY HEALTH INSURANCE: A MIRAGE OR REALITY?.  NNAMDI AZIKIWE UNIVERSITY JOURNAL OF LAW AND CLINICAL LEGAL EDUCATION,  2(2).

Cogan Jr, J. A. (2025). Immoral Hazards.  Seton Hall Law Review,  55(4), 1.

Week 3 Discussion Response

Healthcare Finance

Colleague 1

Aisha Brinkley-Flowers

Semoine Brinkley-Flowers 

In this scenario, the employer is responsible for offering equitable, comprehensive health insurance that pools risk across both younger, healthier employees and older employees with chronic diabetes. Employer-sponsored insurance functions as a risksharing mechanism that spreads predictable medical costs across the workforce and reduces individual underwriting (Getzen & Kobernick, 2022). Because 40% of employees fall within the 40–50 age group and have chronic diabetes, the employer must ensure that the plan includes robust chronic disease management, preventive services, and affordable access to medications. This obligation supports workforce productivity and aligns itself with managed care principles.

The government’s obligation is to establish regulatory protections, such as essential health benefits, nondiscrimination rules, and pre-existing condition protections, while providing safetynet coverage for individuals whose income or employment status limits access to employer-sponsored insurance. Federal reforms such as Medicaid expansion and marketplace subsidies aim to reduce adverse selection and stabilize insurance markets (Frederick et al., 2022). Thus, government oversight ensures minimum coverage standards, while employer plans operationalize those standards within the workplace.

Impact of Moral Hazard and Adverse Selection

Moral hazard occurs when insured individuals increase their use of healthcare services because their outofpocket costs are reduced. Younger employees may overuse lowvalue services if cost-sharing is too low, while older employees with diabetes may increase utilization of necessary chronic care. Research demonstrates that tiered cost-sharing can reduce spending while preserving access to essential services by steering patients toward highvalue providers (Ackley, 2022). Therefore, moral hazard should be managed through valuebased insurance design (VBID) rather than high deductibles alone.

Adverse selection occurs when individuals with higher expected healthcare costs disproportionately enroll in more generous plans. Employer-sponsored insurance mitigates this risk because enrollment is tied to employment rather than individual health status. However, offering multiple plans with significantly different benefit levels can reintroduce adverse selection, as higherrisk employees may choose richer plans (Pardo, 2019). To avoid this, the employer should maintain a single comprehensive plan or ensure that any plan variations are modest and actuarially balanced.

Role of Social Determinants of Health in Insurance Design

Social determinants of health (SDOH) including income, education, transportation, and access to healthy food directly influence employees’ ability to use their insurance benefits. For employees with diabetes, access to nutrition counseling, diabetes education, and transportationfriendly options such as telehealth is essential. Narita (2023) emphasizes that insurance design significantly shapes healthcare consumption patterns, particularly among lowerincome individuals who may delay care when cost-sharing is high. Therefore, the employer must design a plan that minimizes financial barriers to highvalue care and supports chronic disease management through integrated services.

Recommended Employer Health Insurance Policy

For a construction company, where the workforce often includes younger, healthier employees alongside older workers with chronic conditions, a strong managed care option is a High-Deductible Health Plan (HDHP) paired with a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA). This structure provides cost control for the employer while offering employees taxadvantaged savings for medical expenses. When paired with Value-Based Insurance Design (VBID), the plan can maintain affordability for highvalue services even within a highdeductible framework.

The VBID Center (2020) emphasizes that VBID lowers or eliminates cost-sharing for highvalue services—such as preventive care, chronic disease medications, and diabetes management—while maintaining higher cost-sharing for lowvalue or discretionary services (VBID Center, 2020). This approach aligns with evidence that tiered cost-sharing preserves necessary care while reducing unnecessary utilization (Ackley, 2022).

Key components of the recommended plan include:

· HDHP + HSA/HRA

· Allow employees to save pretax dollars for medical expenses.

· Provides employer flexibility and cost predictability.

· Encourages price sensitivity for lowvalue services.

· VBID overlay

· $0–low copays for diabetes medications, A1c testing, retinal exams, and preventive services.

· Reduced cost-sharing for highvalue chronic disease management.

· Higher cost-sharing for lowvalue or discretionary services.

· Moderate premiums with employer covering ≥70–80%

· Ensures affordability and broad participation, reducing adverse selection.

· Integrated chronic disease management

· Telehealth, nutrition counseling, diabetes education, and wellness programs.

This design aligns with managed care principles described by Getzen and Kobernick (2022) and supports risk management strategies outlined by Pink and Song (2020). It also addresses SDOH by reducing financial barriers, simplifying benefit navigation, and supporting chronic disease management for the higherrisk employee group.

References

Ackley, C. A. (2022).  Tiered cost sharing and health care demand.  Journal of Health Economics, 85. https://doi.org/10.1016/j.jhealeco.2022.102663

Frederick, J. D., Fung, D. W. H., Yang, C. C., & Yeh, J. J. H. (2022). Individual health insurance reforms in the U.S.: Expanding interstate markets, Medicare for all, or Medicaid for all?  European Journal of Operational Research, 297(2), 753–765. https://doi.org/10.1016/j.ejor.2021.06.022

Getzen, T. E., & Kobernick, M. S. (2022).  Health economics & financing (6th ed.). Wiley.

Narita, R. E. (2023). Consumption of healthcare services in the United States: The impact of health insurance.  Journal of Risk and Financial Management, 16(5), 277. https://doi.org/10.3390/jrfm16050277

Pardo, C. (2019). Health care reform, adverse selection and health insurance choice.  Journal of Health Economics, 67. https://doi.org/10.1016/j.jhealeco.2019.07.001

Pink, G. H., & Song, P. H. (2020).  Gapinski’s understanding healthcare financial management (8th ed.). Health Administration Press.

VBID Center (2020).  Narrow networks and value-based insurance design. University of Michigan V-BID Center. https://vbidcenter.org/narrow-networks-and-value-based-insurance-design/

Colleague 2

Stephanie Tantoh

This report examines the respective responsibilities of employers and the government in providing health insurance, with particular attention to company employees and low-income community members.

Employer and Government Obligations

1. Employer Obligations:

· Provision of Health Insurance: Under the Affordable Care Act (ACA), employers with 50 or more full-time equivalent employees must offer health insurance to their employees or pay fines. Employers must provide a plan that is affordable and covers basic health care needs.

· Health and Safety Regulations: Employers must keep the workplace safe, which affects employees' health and the number of insurance claims.

· Wellness Programs and Education: Employers can improve employee health and reduce healthcare costs by providing programs that promote healthy habits and active living.

1. Government Obligations:

· Regulation: The government controls the health insurance market to ensure people can get affordable coverage and are not treated unfairly because of pre-existing health conditions (Ahanwa et al., 2025)

· Safety Net Programs: The government offers Medicaid for low-income people and Medicare for older adults. These programs help lower healthcare costs for those who cannot afford insurance.

· Public Health Initiatives: Governments also need to promote public health through programs that focus on long-term illnesses, vaccinations, and preventive care.

Impact of Moral Hazard and Adverse Selection

1. Moral Hazard:

· Moral hazard happens when people act differently because they feel protected from risk. For example, if employees have full health coverage, they might use more healthcare services than necessary, such as extra doctor visits.

· Employers can reduce moral hazard by adding costs, such as copayments and deductibles, thereby encouraging employees to use healthcare services more carefully and responsibly (Cogan Jr, 2025).

2. Adverse Selection:

· Adverse selection occurs when people with higher health risks are more likely to obtain insurance, resulting in an uneven distribution of insured individuals. For example, healthier employees might skip health plans if they think the cost is too high, leaving mostly higher-risk employees enrolled.

· To prevent adverse selection, employers should design health plans that appeal to different employees by offering wellness programs, rewards for healthy habits, and several plan choices.

Recommended Health Insurance Policy

Drawing from this analysis, employers are encouraged to create a  comprehensive, tiered health insurance policy featuring the following elements:

1. High-Deductible Health Plan (HDHP) with Health Savings Account (HSA): This option has lower monthly costs and lets employees save tax-free for future healthcare expenses, encouraging saving and careful spending on healthcare.

2. Preventative Care Focus: Services such as health screenings and vaccinations should be fully covered, with no cost to employees, to encourage them to use these preventive services.

3. Wellness Programs: Provide activities that encourage exercise, support mental health, and help manage long-term illnesses. Give rewards like gym memberships or health coaching for joining.

4. Sliding Scale Premiums: During enrollment periods, offer plans with premiums that change based on income to help lower-income employees or community members afford good coverage.

Addressing Social Determinants of Health

The recommended health insurance policy tackles social determinants of health (SDOH) through several targeted strategies:

· Economic Stability: Different plan levels with HDHPs and HSAs help employees control healthcare costs and keep money saved for health emergencies.

· Education Access and Quality: Wellness programs should teach employees about healthy habits and how to manage healthcare costs wisely.

· Health Care Access and Quality: The comprehensive health plan, including preventive care, helps employees access important services that improve their healthcare.

· Social and Community Context: By launching community wellness programs, employers can support low-income individuals, creating a comprehensive healthcare approach that benefits both employees and the community.

In conclusion, a carefully designed health insurance policy that promotes smart use of services and includes health education helps employers create a healthier workplace, fulfill their duties, and better support employees.

Reference:

Ahanwa, E. S., Ikeatu, E. G., & Okeke, D. C. (2025). LEGALLY INCREASING ACCESS TO HEALTHCARE IN NIGERIA THROUGH COMPULSORY HEALTH INSURANCE: A MIRAGE OR REALITY?.  NNAMDI AZIKIWE UNIVERSITY JOURNAL OF LAW AND CLINICAL LEGAL EDUCATION,  2(2).

Cogan Jr, J. A. (2025). Immoral Hazards.  Seton Hall Law Review,  55(4), 1.