Question

Your company has traditionally provided health insurance not only to employees but also to retirees who have worked for the company for at least 20 years at the time of retirement.

Seven years ago, your company cut costs by switching current employees from open-ended health insurance to health maintenance organizations (HMOs). At that time, the company kept open-ended insurance for retirees because research indicated that retirees wanted to keep their current doctors, which they might not be able to do with HMOs. But the high cost of the open-ended insurance program gives the company no choice: to continue to insure retirees, your company must hold down costs, and HMOs offer the best way of doing that.

Under the open-ended plan, the retiree pays 20% of all costs (up to a yearly ceiling of $10,000 and a lifetime ceiling of $100,000) and the company pays 80%. In an HMO, more costs will be covered for the patient. Routine doctors’ visits, for example, charge only a $10 co-payment. Most tests, such as mammograms, X-rays, and blood work, are covered 100%. Hospitalization is covered completely, and there’s much less paperwork. By presenting their insurance card when filling a prescription, patients pay only the co-payment, rather than having to pay the entire amount and then filing for a partial reimbursement later.

The bad news for retirees is that they have to go to a physician listed with the HMO. If their current physician is not on the list, retirees will have to switch doctors to retain benefits. Furthermore, the primary care physician must refer the patient to any other health care providers. That is, someone who wants to see a specialist or go to the emergency room must call the primary care physician first. Primary care physicians always approve such referrals whenever they seem medically advisable, but the requirement does limit the patient’s freedom. Further, since HMO physicians are paid a flat fee, some people fear that they will be reluctant to prescribe expensive treatments (which might cost more than the fee), even when those treatments are essential.

Your company offers a choice of HMOs. Informational meetings will be held next month for retirees (and anyone else who wishes to attend) to explain the various options.

As Vice President for Human Resources, you must write a form letter to all retirees, explaining the change and telling them how to indicate which HMO they prefer. Enclosed with each letter will be a postcard listing the plan options. Retirees must return the postcard within two months, indicating which plan they have chosen. Anyone who does not return a postcard will be assigned to an HMO by the company.

You should make up a name and address for a sample recipient. You can either make up a return address for your organization or provide an actual address.

Hints:

It is up to you to decide what organization you work for. Ideally you should pick an organization you know something about. When writing your letter, consider the following questions about your audience: About how many retirees do you have? What percentage are under 80, in reasonably good health? What percentage are 80 and over, sometimes with more serious health problems? How well educated are your retirees? How easy will it be for them to understand the HMO options? What times would be convenient for the retirees to come to meetings?

Make sure your information is presented clearly and organized in a reader-friendly way.

When possible, use reader benefits and positive emphasis without being misleading about negatives.

Answer 1

Mr. John Costa

H No – 45

Lane - 6

Maryland Avenue

Florida

Dear Sir,

Sub: Migration from open-ended health insurance to health maintenance organizations (HMOs).

Greetings from New Gen Technologies.

Hope you are doing well and are thoroughly enjoying your time. I am writing this letter to inform you about a slight change in the health insurance offered by our firm to the retirees.

As you are well aware, we at New Gen Technologies deeply value the contribution made by all our employees and are committed to look after their wellbeing post their retirement. However we also have to balance this commitment with the cost being incurred to ensure that the firm growth is sustained. Keeping this in mind, we have decided to migrate the health insurance offered to retirees from the open ended health insurance to the health maintenance organizations (HMOs).

While this would mean switching from your existing physician if your existing physician is not on the list to someone who is approved as per HMOs, we have ensured that there are sufficient options available in close proximity to your location. As a process also, you will be required to first approach your primary physician for further referrals to specialists. The advantage with HMOs is that it has more coverage and by producing their insurance card patients pay only the co-payment, rather than having to pay the entire amount and then filing for a partial reimbursement later.

We also like to assure you that we will reviewing this plan and the performance of HMOs to ensure that you get the desired level of service at all times. Along with this letter is enclosed a leaflet containing a list of options and you are requested to provide your choice and mail the leaflet back to the undersigned address within two months. We would also like to inform you that if we do not receive the leaflet informing us about your choice within two months, we will take the liberty to allocate an HMO to you based on our discretion.

A knowledge session is also being held in our office on 15^th Feb 2018 beginning at 10:00 AM which would provide information on all the options and try to answer any questions that you may have. You are requested to kindly attend this session to try and seek any clarification as the need may arise.

Your sincerely

Oliver Jackson

VP (Human Resources)

New Gen Technolgies Inc.

Oakland, California