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Insurance Ratings and Wage Models

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance Ratings and Wage Models

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Insurance Ratings and Wage Models

Question I

In a broad perspective, the essence of insurance rating is to apply limitations to the variation of insurance premiums in accordance with the beneficiary’s state of health. The idea is to check against the excesses of the individual health insurance market (Jacobs & Rapoport, 2004). The institution of these controls is because people deemed to have high-risk health conditions may not access affordable health insurance in an unlimited market. The tendency among many insurers to prefer people who are considered less risky underscores the importance for placing checks on the insurance market. However, the challenge in restriction is that many insurers may want to invest in areas without such restrictions, which may lead to a gross imbalance in the demand and supply of insurance coverage in states that may be in dire need for such services (Jacobs & Rapoport, 2004). Few investors would be willing to venture in highly restricted markets.

Concerning the challenge of information asymmetry, the insurer may lack vital information about the beneficiary’s state of health, which may become profoundly costly on the part of the insurer (Jacobs & Rapoport, 2004). Generally, insurers adjust their premium s in accordance with their assessment about the level of risk posed by the individual’s health status. Information asymmetry complicates the operations of the insurer in ways that may result in gross imbalances and losses. If done on a large scale, the trend can destabilize the insurance industry because the premium levied on the beneficiaries would significantly incommensurate with the real costs involved (Jacobs & Rapoport, 2004). Therefore, it becomes appropriate for the insurance companies to find ways of engaging with the beneficiaries along the lines of honesty and candidness for the survival of the sector. There should be a balanced trade-off between the client’s needs and the premiums.

Question II

Explorations into wage and employment figures in the nursing fraternity have often led to the question of whether nurses are underpaid or overpaid. Crucial factors to consider when choosing a particular model include the qualification of the nurse, the length of service, the hours of work per day, and comparison with other employees with college qualifications (Sloan & Hsieh, 2017). The model should also take care of the nature of risks that the nurse may face at the work place and the effect of inflation. The labor market should also focus on the personal information about the nurse such as marital status, number of primary dependents, housing, transport cost, health, and other specifics that have a direct bearing on the income status of the nurse. Reconciling such details against the capacity of the healthcare institution should lead to a fair figure of wages for the nurse.

The monopsony model remains one of the most appropriate for the determining the wage and employment figures of the nurses. In general, this model is based on the assumption that the labor market is a single employer that determines the range of figures for the nurses (Sloan & Hsieh, 2017). In effect, the employer sets the bar of employment basing on particular metrics that represent a fair engagement between the institution and the nurse. This model allows the hospital to engage in strategic initiatives that include raising wages with the objective of attracting more employees within the rank of the organization. One of the challenges of this arrangement is that the employer runs the risk of low profit margins because of an expanded wage bill. In order to sustain the model, the employer should explore ways of shoring up the bottom line by exploring new revenue channels.

 

 

 

References

Jacobs, P., & Rapoport, J. (2004). The economics of health and medical care. Sudbury, MA: Jones and Bartlett Publishers.

Sloan, F. A., & Hsieh, C.-R. (2017). Health economics. Cambridge, MA: The MIT Press