11. The Meridian Advertising Agency has 1,340 employees in six states. The main office is in Richmond, Virginia. 50 percent of the employees are women in their childbearing years. Most employees are in good health. The major medical losses last year occurred because of Jack Dentons heart surgery, 15 baby deliveries, and four cases of cancer treatment. Jack Denton is the creative director of the agency.

Meridian is using EB-Consulting to assist in choosing healthcare and dental coverages. Currently the agency fully insures six options of health plans:

• A staff model HMO available only in Richmond (premium per employee is $345 per month).
• An IPA HMO available in many, but not all, locations ($355 per month).
• A POS available in all locations ($360 per month).
• A PPO available in all locations ($375 per month).
• An indemnity plan available in all locations ($390 per month).
• An HSA plan with an underlying PPO ($270 per month premium; the employer contributes into the account at $100 per month).

The Meridian Agency provides $345 each month. The rest is paid by the employee using a premium conversion plan.

a. Compare the current healthcare programs that are used by the Meridian Agency in terms of the following:

• Benefits provided under each plan.
• Possible out-of-pocket expenses for the employees and their families for illnesses and injuries.
• Choice of providers.
• The ways providers are being reimbursed.

b. Jack Denton (the employee who had heart surgery) has two children. He lives 20 miles west of Richmond in a rural community of 100 people and farms his land on the weekends. His wife is expecting another baby in four months. Before his surgery, Jack and his wife evaluated the plans and selected the one that best fit their needs.

1. Which health plan do you think they selected? Explain your answer.
2. Do you think now, after his surgery, Jack is still happy with this choice? Explain your answer.

c. Meridian is considering adding a dental plan.

1. What type of dental plan do you think EB-Consulting would suggest?
2. Why are dental insurance plans more likely than medical expense plans to include benefits for routine examinations and preventive medicine?

d. EB-Consulting is trying to convince the Meridian Agency to add long-term care insurance to their employee benefits package. Explain long-term care coverage.