Newby Health Systems Needs Health Insurance

By: Nancy H. Shanks

A young entrepreneur, Ima Newby, has been working in the health information technology field for a number of years, both as a developer and user of electronic health records (EHRs) for dental practices. In her spare time she has begun working on a new idea that is innovative and provides a new software option that integrates various functions for the practice, including patient records, billing, HR, etc. It addresses the many complaints from dentists, other practice employees, insurers, and patients, and is user friendly. Ima has taken a giant leap, quit her job, and launched Newby Health Systems as a brand new start-up. She has worked with a lawyer to set up the privately held corporation, and through her various contacts has lined up a number of backers and a few "angel investors" who are providing the needed capital to launch the business. Several of these folks have agreed to become members of the Board of Directors. It is now time to begin setting up the business, acquire office space, hire staff, and begin operations.

A few young hot-shot software developers, engineers, and programmers have jumped on board and embraced Ima's ideas and strategic plan. Given the financial resources at her disposal, Ima has attracted many other staff members with other technical expertise. While these folks are clearly well-versed in developing the EHR package and have the IT aspects of the business well covered, they aren't schooled in management, and Ima needs help putting the pieces in place in terms of financial, HR, marketing, and other aspects of management.

This is where you come in. You have been hired to oversee the HR area and have numerous HR activities on your plate. One of the reasons you were hired is because of your health care management background. In addition to the typical HR functions, however, one of your first tasks is to develop a health insurance package for the company. You have a little time because the new employees have used COBRA policies to maintain coverage or have coverage through a parent or spouse. That coverage, at least under COBRA, is very expensive, making attention to this a priority.

Ima has laid out the following parameters and assumptions for this assignment:

• Plan on coverage for 25-50 employees;
• Make sure that the private health insurance coverage is good and will meet the needs of current and future employees; and
• Be thorough in assessing all options for coverage.

Ima wants you to prepare a written, but concise, proposal for her and the other Newby leadership to consider. This should include a recommendation on the type of coverage and justification for that recommendation versus others. Specifically, she wants the following questions addressed.

1. will you go about figuring out what the employees need in terms of coverage? What data do you have in the HR records that will help you in this regard? What other steps might you need to take?
2. What specific types of benefits do you think the coverage should provide? Is a comprehensive policy the best option, or might a more limited policy, such as a major medical or catastrophic policy, suffice?
3. What specific health plan seems to make the most sense for this group?
   • Should you cover just employees or provide coverage for families?
   • Explain why you would or would not select each type of plan, i.e., conventional indemnity plan, HMO, PPO, POS, or HDHP. Be sure to address all plans.
   • What characteristics of the plan are most important?
4. An option is for Newby to self-insure. Explain why this is a good or a poor option.
5. Cost is always an issue. What do you recommend in terms of having employees share in the cost of coverage? Will there be deductibles, copays, coinsurance?
6. How much do you anticipate this costing the employees and the company on an annual basis?