Sure Care Health Maintenance Organization is seeking a managed care contract with a local manufacturing plant. Sure Care estimates that the cost of providing preventative and curative care for the 300 employees and their families will be $36,000 per month. The manufacturing company offered Sure Care a premium bid of $200 per employee per month.
a. If Sure Care accepts this bid and contracts with the manufacturing firm, will Sure Care earn a profit or loss for the year? How much?
b. What premium per employee per month does Sure Care need to break even?
c. If Sure Care wants to earn $100,000 in profit for the year, what is the required premium per employee per month?
d. What concerns do you have about this analysis?
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