Managed Care Organization Premium

Managed Care Organization Premium

            For this discussion board, we will be discussing a Managed Care Organization (MCO) whose marketing manager reduced the MCO’s premium by 10 percent and saw a 20 percent increase in the number of subscribers.  After seeing this increase, the manager then thought that if the premium were reduced by another 20 percent there would be an additional 40 percent increase in the number of subscribers.  The reasoning behind this, is meeting the main goal of using elastic demand.  Though, before expanding on the discussion of elastic demand, the concept of price must be determined.  Price is the “level of monetary reimbursement a firm demands for its good or services” (Berkowitz, 2017, p. 342).  Additionally, when a company establishes a price it is corresponding to the “level of value that the customer perceives in the service being offered” (Berkowitz, 2017, p. 342).  The example provided, shows how a change in the value of the product can alter how the customer perceives the service or services that are being offered (Berkowitz, 2017).  Deciding on a products price is a major aspect of a company’s marketing strategy (Berkowitz, 2017).  With this, it is important to note that “price can affect consumer demand as well as competitor response” (Berkowitz, 2017, p. 342).  Thus, leading us to the analysis of elastic demand.

Elastic Demand

Elastic demand is a “demand that rises with a corresponding drop in price” (Berkowitz, 2017, p. 348).  Through the use of elastic demand, once the customer’s response to price is determined, the company must assess the degree of price elasticity (Berkowitz, 2017, p. 352).  Showing how company’s pricing decisions can either positively or negatively affect the success of their product or products (Berkowitz, 2017, p. 342).  Though it is imperative that this is not confused with inelastic demand, which is “when an increase in price by some percent does not lead to a corresponding decline in demand by a similar or greater percent” (Berkowitz, 2017, p. 348).  Elastic demands are utilized through meeting the needs of customers by creating distributing networks that are “traded at flexible selling prices offed by a retailer” (Sekizaki, Nishizaki, & Hayashida, 2016, p. 371).  They are also used to help evaluate the “sensitivity of customers to price change” (Brunner, 2014, p. 57).  This then helps to show whether the demand for the product is either elastic or inelastic (Brunner, 2014).  Elastic demand is an important strategy to understand because the healthcare industry is moving from a “reimbursement environment into a retail economy where products and services are offered to consumers, the pricing considerations common to traditional businesses” (Berkowitz, 2017, p. 369).

Christian Viewpoint

The discussion of managed care organization premiums and elastic demand reminds me of a Bible verse from the book Romans.  Romans 8:28 states, “And we know that in all things God works for the purpose of those who love Him, who have been called according to his purpose” (New International Version).  This verse reminds us that through God all things are possible.  As Christians, we must always remember to put God first in all the we do, including situations such as managed care organization premiums and elastic demands.

References

Berkowitz, E. N. (2017). Essentials of health care marketing. Burlington, Ma: Jones &

Bartlett learning.

Brunner, C. (2014). Changes in electricity spot price formation in germany caused by a high share of

renewable energies. Energy Systems, 5(1), 45-64. doi:10.1007/s12667-013-0084-2

Sekizaki, S., Nishizaki, I., & Hayashida, T. (2016). Electricity retail market model with flexible price

settings and elastic price-based demand responses by consumers in distribution network.

International Journal of Electrical Power and Energy Systems, 81, 371-386.

doi:10.1016/j.ijepes.2016.02.029