INNOVATION IN EMPLOYER HEALTH COVERAGE: THE CONSUMER DRIVEN HEALTH PLAN (CDHP) AT LOGAN ALUMINUM

Journal of the International Academy for Case Studies, 2006 by Hatfield, Robert D

CASE DESCRIPTION

The primary subject matter of this case concerns a particular emerging innovation in employee health care coverage called Consumer Driven Health Plans (CDHP). Secondary issues examined include issues related to healthcare costs increases in the U.S. and other developed nations. The reactions to these healthcare costs increases are categorized, defined, and illustrated. It becomes clear from the case that they may be no easy answer to rising healthcare costs. Further, issues related to employee involvement and the strategic fit between CDHP and involved employees is explored.

The case has a difficulty level of three, appropriate for junior level or above. The case is designed to be taught in one class hour after at least one hour has been spent surveying existing approaches being used by employers to provide health care insurance coverage such as HMOs. PPOs, and POS plans. The case is expected to require one hour of preparation by students.

CASE SYNOPSIS

Healthcare costs are soaring in the U.S. and in other developed nations. The model used in the U. S. is that the government provides healthcare insurance for the poor and for senior citizens, while employers traditionally provide healthcare coverage for employees. Employers and government have tried approaches to containing the costs of healthcare insurance while still providing coverage. The government created the "health maintenance organizations" (HMOs) and the marketplace created "point-of-service" (POS) and "preferred provider organization" (PPO) plan designs. Managed care approaches were introduced into virtually all plans in an attempt to control runaway costs in recent years. Some feel that the a "free ride" approach causes consumers of healthcare to have no financial stake in the costs of health services which, in turn, makes such costs hard to control.

Consumer driven health plans (CDHPs) have emerged as plans designed to get the consumer to take a normal consumer interest in the cost and quality of healthcare service. CDHPs must have two elements: some type of medical spending account and high deductible healthcare coverage insurance. Logan Aluminum manufacturing company provides a graphic illustration of the positive elements of a CDHP with lots of additional plan elements, such a wellness, financial incentives, and free health services. Since Logan has implemented the CDHP healthcare costs have not seen the huge increases seen in the U.S. The fact that Logan uses participative management and team approaches in other areas of its operation is seen as helping to get participation and teamwork on solving the healthcare cost problems.

INSTRUCTORS' NOTES

RECOMMENDATIONS FOR TEACHING APPROACHES

The special aspect of this case is that it presents a novel approach to a well-known problem involving healthcare costs. It also brings realistic details to help the student understand the abstract concepts and acronyms associated with these issues.

The primary goal is for the student to understand what is considered a consumer driven healthcare plan (CDHP). The secondary goal is for the student to be able to place this innovation within the mix of other standard healthcare plans. Further, it is useful for the student to see the broader policy, social, and political implications. The fit between being consumer driven and being an empowered employee is also an interesting relationship that is illustrated by the Logan case.

The standard case approach will accomplish these goals. Assign the case as homework, and then have the student teams answer the questions. Open class discussion based upon the answers of the teams. Finally, update the case with the information on results found in the epilogue found here in the instructors' notes.

If the course includes a unit on types of healthcare plans (e.g. POS, HMO, and PPO) then this case would be a good way to demonstrate how innovation can modify these "standard" approaches. If the course only approaches the topic of healthcare plans offered by employers in a broad way, then this case will provide just enough information about the plan types to allow learning and discussion.

There are a number of short videos provided by publishers and/or available commercially. I recently used a 10 minute clip titled "Crisis in Healthcare" that would provide a good set-up for this case. Spring boarding off of a video on healthcare is a good way to bring in students of varying learning styles.

There are a number of topics in this case that would be worthy of a short (or long) research paper. The articles in the References section provide an example of the amount of academic and other information available. While students may not be able to write a long research paper on CDHP they certainly can write a multitude of topics surrounding healthcare issues in the U.S. and around the world.

In a course stressing international dimensions of organizations students could choose countries or regions of the world and research how healthcare insurance and/or coverage is handled in the chosen countries or regions.