Economics

Your employer, like many people, is concerned by the rising cost of healthcare premiums. (Note: healthcare is spelled as one word as an adjective, and as two words— health care—as a noun.) Even with the reforms enacted by Congress, premiums are ever more costly for some companies, even as more and more workers require extensive and expensive medical care.
Many workers require additional care because of illnesses and chronic conditions that are considered to be lifestyle-related, the product of smoking, drinking alcohol in excess, being overweight or obese, and the like. This added care results in added costs for your employer, who pays half of the premiums as part of an employee’s benefits package.
Your employer is considering instituting a policy requiring employees who incur extra costs because of those lifestyle-related causes to pay them. To accomplish this, he plans to charge those workers an additional 10 percent over the premiums that other workers pay.
Your employer asks you, as an economist, to justify this differential, and he wants to be able to argue from the basis of an economic principle or concept. What is that governing idea? If the differential is wrong somehow from that economic point of view, then he wants to know that, too.
Your employer will deliver his decision in a speech before stockholders and employees. You are to write the speech for him. It must be 500 words—no more than 525, no fewer than 475—to accommodate the time he has reserved for it.
In the course of this speech, he will need to inform the audience of the course of action he believes it best to take: The company should charge workers more for engaging in costly behavior, or it should not.
Remember that you are writing as an economist, not as a moralist, ethicist, or lawyer. Remember, too, that you are writing in the person
of your employer, not yourself. Thus: “As the president of this company, I believe that . . .” and not “As an employee of this company, I believe that the president of this company should . . .”
NOTES
1. As with assignment 1, your speech should have a title. The byline should carry your employer’s name along with you own. Thus, if I were writing it, the byline would be “by Gregory McNamee for John Doe, CEO of Acme Products.”
2. Please be sure to use this convention, established with assignment 1, for naming your file:
Lastname_Firstname_Econ479_SS2_assignment2.doc

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