Assignment

Submitted by
Anu Jose
MBA HR
 Employee Health Investments
In globally competitive environment, it is very difficult to provide high
levels of healthcare and health coverage for the employees. Many companies
are cutting the health coverage for the employees.
Organizations business cycle and health of the employees are closely related as
the spine of every business is considered as their skilled employees. As a part of
their responsibility towards the employee’s health and safety it’s necessary for
the organizations to provide health insurance for their employees. As an
example, in the current pandemic situation of Covid-19, we all know how most
of the organizations are struggling to keep their business alive.

Importance of Health Investments

Health insurance helps protect an individual or family from financial loss for
costs incurred because of sickness or injury. There are several reasons why it
makes good business sense for employers to offer insurance benefits to their
employees and their families.
 Increases Competition: Business that offer health insurance as part of
their employee benefits package can attract more qualified applicants
than those who don't. This is especially true when industry competitors of
like size in the same general area offer health insurance benefits.
 Reduced Operating Costs: It's a way of keeping operating costs low,
because employees are generally more apt to take a position at a lower
salary when health insurance benefits are provided. This is because it
generally costs more for someone to obtain an individual or family health
insurance policy than to get employer-sponsored coverage, making the
difference of a lower salary negotiable.
 Tax Advantages: Businesses offering health insurance can deduct their
portion of the contribution toward their employee plan as a business
expense and get a tax advantage. If the business is incorporated, the
business owner's insurance and the coverage paid for employees are
deductible.
 Lower Insurance Costs: Businesses can usually get better rates for
insurance than individuals. The more people in a group health insurance
plan, the lower health insurance costs are for everyone. Risks are spread
across a larger group of people, which ensures costs stay low. It's
therefore advantageous for a business leadership to extend coverage to
employees to benefit from lower health insurance costs.
  Improved Productivity and Morale: A healthy workforce is a more
productive workforce. A health investment-based study found that
healthy workers were three times more productive than those in poor
health. In addition, staff morale is generally higher.sss
Benefits of employer owned health investments
Employer-owned health insurance is a voluntary benefit provided by the
companies to their employees. Employers realize several benefits from
providing health insurance to employees. Perhaps the greatest benefit is that
employer-owned health insurance helps keep employees healthy and
productive.

 Better Rates and Coverage: A company that insures large group of

people in an employer-owned insurance plan is likely to get a better rate
than individuals buying insurance on their own. There are typically more
plans available in the group market. The company's owners may benefit
from the ability to buy better coverage for less as well.
 Tax Benefits: Companies offering health insurance to employees can
deduct the employer portion of the premium as a business expense.
Depending on the size of the business and annual profits, this can provide
a significant tax advantage.
 Competitive Advantage: Companies providing generous benefits,
including health insurance, have an easier time recruiting from a more-
qualified pool of applicants, compared with companies that don't offer
health insurance. In industries or areas where competition is fierce,
companies want as many advantages as possible.
 Lower Operating Costs: Companies with employer-sponsored health
insurance not only attract more qualified applicants, but they're also more
likely to retain them. In addition, employees may accept a slightly lower
salary in exchange for better benefits. Both these factors help control a
company's operating costs.
 Increased Productivity: Employees of companies who are covered by
employer-sponsored health insurance are more likely to exercise, eat a
healthy diet and seek preventive health services, as a result, employees
are healthier, happier and able to work harder and longer than those who
lack access to affordable coverage and medical care.
Scope Of Health Investments
Investing in health helps the world rise to the challenges identified in its Health
Strategy which have been compounded by the economic crisis: an ageing
population, an increase in chronic diseases, a greater demand for healthcare and
the high cost of technological progress. Health is a value in itself. It is also a
precondition for economic prosperity. People’s health influences economic
outcomes in terms of productivity, labour supply, human capital and public
spending. Health expenditure is recognised as growth-friendly expenditure.
Investing in sustainable health systems combines innovative reforms aimed at
improving cost-efficiency and reconciling fiscal consolidation targets with the
continued provision of sufficient levels of public services. Investing in peoples’
health as human capital helps improve the health of the population in general
and reinforces employability, thus making active employment policies more
effective, helping to secure adequate livelihoods and contributing to growth.

Different Types Of Health Benefits Investments With Ensured returns

The healthcare sector is made up of many different industries – from
pharmaceuticals and devices to health insurers and hospitals – and each has
different dynamics. Investments in this sector are affected by many variables,
including positive trends related to demographics and negative trends related to
reimbursement.
Healthcare investing requires a multifaceted approach to understand the
underlying drivers. Investors can profit from investments in both the overall
sector and/or its industries. primary factors Some of the most beneficial health
investments as follows: -
1. Healthcare Sector: When deciding on a healthcare company in which to
invest, the following prevalent trends must be considered. Changes to or
continuations of these trends can have implications for a variety of areas
within the healthcare sector. If focused on these trends, the health sector
is ensured returns investment model.

Positive Trends:

 The aging population

 People living longer with chronic disease
 Obesity and diabetes epidemics
 Technological advances
  The global reach of disease
 Personalized medicine

Negative Trends:

 a single-payer system
 expenditure as an increasing share of gross domestic product (GDP)
 the uninsured
 cost controls
 consumerism

2. Pharmaceutical and biotech Sector: These companies often spend a

significant percentage of revenue on research and development (R&D) to
discover new compounds. The hit ratio is very low as discovery of new
compounds is very difficult and tedious. When investing in the drug
companies, there are several things to be focused.
You need to have some understanding of:

 The underlying disease or condition that a specific drug treat

 The number of people affected
 The number of compounds currently available
 The process of discovery and reaching to market,
 the availability of substitutes, including generic versions of drugs patents
 the overall marketing framework

This is an industry that is greatly affected by clinical-trial data, and surprises

about the outcomes of the data can affect the stock price tremendously.
Positive surprises - better-than-expected clinical data, faster time to market,
etc. can cause stocks to appreciate significantly in a short time period and
that’s why it is considered as beneficial and ensured method of investment,
while negative surprises can have the opposite effect. This is an industry that
requires active monitoring on the part of the investor.

3. Health insurances: They are the companies that pay the bills - sort
of companies purchase health insurance in one of two general ways:

 The purchasing company assumes the risk of paying all the bills.
 The health insurer assumes the risk.

A company's choice can affect its risk and profitability. Underwriting

skills drive health insurers' profitability. The better the underwriting, the
 lower the medical costs relative to the premium (or payment) received from
the purchasing company. The key ratio that health insurers report is the
medical cost ratio. This ratio is akin to the operating-profit ratio and should
be looked at as a trend analysis. The medical loss ratio is also an important
ratio and is similar to the gross margin, only in reverse (lower ratios are
better). In addition, you want to invest in a company that has a conservative,
trustworthy management because there are often timing mismatches between
when medical services are consumed and when the bills are paid. Proper
liability reserves is also an important measure to review. If we are able to
monitor all those important aspects, the health insurance sector considered as
confirmed mode of investment with ensured income and return.

4. Health Facilities: The providers of medical services - the hospitals and

clinics - are the cornerstone of health cares. regardless of whether that
person has health insurance or money to pay for the services. These
clinics can pick and choose which patients to treat and benefit from
higher payments from insurance companies. Meanwhile, hospitals are
faced with bad debts impacting their profitability. The bad-debt ratio is an
area of focus for investors. In addition, cost controls are key for hospitals'
profitability. Many hospital systems have yet to make technological
advances like electronic medical records, proper purchasing and
operating systems a part of their standard operations, although this seems
to be changing. Controlling costs among numerous cost centre’s is very
difficult for hospitals. The ones that do this well and incorporate
computer systems tend to be considered the best managed facility. The
best managed/handled facilities are the most popular way of investments
in health sector with ensured returns.
5. Other Industries: Distributors are intermediaries between the drug
manufacturers and the pharmacies, and receive a service fee for
controlling the logistics for the pharmaceutical companies. Many
distributors also have other lines of business that improve margins, such
as packaging some of the drugs, but the service-fee margin is the primary
driver of profits.

Medical technology and device companies manufacture a host of medical

products, from bandages all the way to artificial joints and heart stents. These
companies, similar to the drug manufacturers, spend a large percentage of
revenues on R&D, and some need to follow the same clinical-trial path.
Investing in these companies requires knowledge and analysis of the new
technology as well as the competitors and known substitutes. Adoption rates
and gross margins are important indicators of a company's success, which is
similar to other technology companies.