Discussion Question

Health insurance is a huge cost for a business. This week, you reviewed content on a wide range of manager issues including pay for performance, contracts, imperfect information, morale hazard and adverse selection. Knowing what you know, consider the following:

In a recent strategic meeting, you and your fellow leaders in the company discuss overhead costs and the rising tide of costs that are eating away at your business. Health insurance coverage is a major contributor to the ever increasing costs. Is there anything that you can do? If so, what? Use your knowledge of this week's concepts to explain your strategy.

If you believe that the senior leadership cannot do anything, how do you explain (using your best economic jargon) that to the VP who is adamant that change is possible?