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Question #1: All Care Health Maintenance Organization is seeking a managed care contract with Sure Teeth,...

Question #1: All Care Health Maintenance Organization is seeking a managed care contract with Sure Teeth, a locally owned dental supply company. All Care estimates that the cost of providing preventive and curative care for the 500 employees and their families will be $120,000 per month. The Sure Teeth has offered All Care a premium bid of $250 per employee per month. If All Care accepts this bid and contracts with Sure Teeth, will All Care earn a profit or loss for the year? How much? What premium per employee per month does All Care need to break even? If All Care wants to earn $120,000 in profit for the year, what is the required premium per employee per month? What concerns might exist for All Care that is not captured in this analysis?

Homework Answers

Answer #1

Calculation of Profit/ Losse

​​​​​​Revenue for 500 emplot=125000

(500×250)

Total Cost =120000

Profit =5000

Calculation of premium per employee per month at Break even

Given fixed cost is 120000

No.Of employees is 500

Premium price at break even is 120000/500=240

Premiume price to earn profit of 120000 per employeeper month

Given cost 120000

Required profit 120000

Total is 240000

Premium is 240000/500=480

Note:- All above calculation are done with an assumption that given 120000 is a fixed cost and there is no viarable cost

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