Describe about the Insurance Health Care Coverage Under the Affordable Care Act.
The modern world as we are aware of functions through a list of different complex situations. These complex methods and modern lifestyle often leads to various risks in the life of the human beings surviving in the world. Thus, there is need to cover the risks through insurance plans so that any losses can be recovered and the life of an individual can run smoothly.
This assignment deals with the story of Michael and Marry who are couples and run a health food center. They are business partners though Michael runs the business and Marry is a housewife. The financial advise regarding retirement of the couples will be discussed along with the losses and risks they might face during the term of life. The best insurance product to cover all the risks pertaining to their life will also be discussed.
The other part of the assignment deals with the Act introduced by Barrack Obama, the president of the United States known as the Affordable Care Act or the “Obamacare”. The act makes it compulsory for every individual to purchase a health insurance product from the centralized exchange center. This act provided a change in the health care system.
Thus the study will analyze both the financial advise for Michael and Marry and also the pros and cons of the Affordable Care Act and its impact on the health care system all around the world.
This section deals with the financial position of Michael and Marry who are a couple and are also business partners. They need a future planning of their financial condition to find out the risks and the returns involved in it. It is found out that there are typically three kinds of losses pertaining to the life of an individual namely the Property Loss, Liability Loss and the Personal losses.
These losses are inclusive of any situation that depicts the possibility that any sort of property loss can take place. There exists two kinds of this loss namely, Real and Personal property loss. The real property deals with the buildings, land and other structures related to the land while personal property deals with all the intangible and tangible assets and properties copyright furniture, jewellery etc (Keneley,2015).
When Michael and Marry faces such a loss it responds to a loss of property and causes direct and indirect losses in the form or reduction in the profit or revenue of an individual and increase in the expenses, which is known as Net Income loss. Incase of the couples, the losses relating to this topic are the family home purchased in 2003 at $ 580,000 whose expected value on 30.09.2014 is $ 700,000. The contents of the house worth $ 90,000, which estimates to $ 100,000 now. Any loss pertaining to these elements are also a part of the property loss and so the mortgage payments are also a part of it.
These losses are ideally any situation that depicts the estimation of a claim relating to any legal responsibilities of a person or business for injury or any damage suffered by any other party. There are some incidents that such cases lead to a lawsuit. A liability loss is thus a monetary claim due to damage to another party’s property. If Michael and Marry insures these losses then they can pay out any losses relating to any pain and medical expenses of a third party other than the family members.
The financial condition of both Michael and Marry depicts that they have a business and thus they will create an insurance relating to this loss to protect the interests of the employees working in the food center. From the table though, there are no other losses, which needs to be protected (Mann,and Lewis, 2012).
Any situation or condition that creates the possibility of any financial loss to any individual due to death, sickness and injury is included in this loss segment The insurer ideally purchases an insurance for any potential financial losses relating to pure risk, accidental loss, any losses that can be measured and will happen with time, losses for independent exposure etc.
Michael and Marry are also exposed to such losses because they have lot of items, which can get destroyed and lead to a financial loss. The shares purchased by them from Westpac, money in the savings account, funds related to the superannuation funds, share of Woolsworth and Incitec pivot are all exposed to risks. It is known that shares have a high return along with high risks, thus it is advisable to insure such loss to obtain the financial loss if any damage incurs to these items. The two vehicles are also an asset to Michael and marry and thus they need to be insured as well as any accidental loss to the cars can be harmful to them. The couple also needs to insure their own life because if anything happens to them then it also is loss to its partner and their children. Therefore, it is advisable to them to insure themselves along with all the assets like the vehicles and the shares in order to abstain from any losses.
It is known that Michel is the only one who runs the business whereas Marry takes care of the family and Marry feels that if anything happens to Michael, then it will be impossible for her to control the business herself. In this context, if Michael becomes disabled, then an additional cost of $ 20,000 will be added to their expense and so to cope up with such loss, a health insurance product needs to be purchased to deal with the additional cost of $ 20,000.
The different techniques available to them to manage their risk exposure are as follows:
It is the most effective means to control the risks through undertaking any activity or program that would abstain from undesirable loss. There are plenty of services provided by the government to help reduce these loss exposures, which cannot be protected by the private enterprise. If any risk exposure cannot be protected, the individual predicts or retains the financial and legal liabilities of that risk (Sadgrove,2016).
This method reduces the frequency of the risk. Any good measures for the prevention of losses, if implemented will be beneficial to an individual. Risk reduction means any transformation. The individuals need to reduce any activity that can cause accidents. Such changes can occur through proper training and education and also through the implementation of strict laws to restrict the illegal actions of the individual.
This form deals with eliminating the or preventing any risks. Thus such mechanisms are implemented to reduce the effects of any perils. Such actions are associated with decreasing the severity of the losses through frequent supervision and control. Some risks can be decreased through simple warning from the beginning.
Separation of the exposures, diversification and duplicating of the exposures are also a way to reduce the level of risks pertaining to any activities and through such a method, the intensity of the risk can be reduced effectively.
The transfer of risk involves the legal or financial liabilities associated with a risk, which can be transferred to any external organization. Such an action can only be completed through a contract. The terms and conditions specify the position on which the losses are shifted. Any insurance service is actually the transferring of the risks to the third party and avoiding any financial losses for an individual or an organization (McNeil, Frey,. and Embrechts, 2015) .
The couple Michael and Marry are in a position to face losses during their life span and thus needs to manage the risks through the purchase of ideal insurance products. The insurance practices maximize the capital efficiency evaluation based capabilities to decrease exposures to financial risks and alternative risk funding techniques.
While evaluating the mechanism impact of market pricing and other dynamic reasons on product and capital sources through insurance linked securities, insurance hedge funds, bonds and life insurance securitization and life settlements are taken into consideration. The couple thus needs to purchase a product, which will be ideal for their exposure to losses. These evaluations are compulsory to find out the best product for them.
From the above study it is understandable that Marry is totally dependent on Michael and thus a life insurance policy needs to be purchased, which can provide financial assistance if death or injury occurs to Michael. A health insurance to cover the claims, due to any medical emergency needs to be purchased as well. The couple also has other assets like the vehicles and shares with them and so an insurance covering the loss out of these assets also needs to purchased (Hopkin,2014). Thus the ideal product for them will be a life insurance policy covering the death and disability along with providing health care coverage. A vehicle insurance also needs to be bought and an hedging insurance product to cover the losses out the shares also requires to be purchased by the couple.
The couple is not attracted towards paying a high premium for the insurance taken. It is found that the amount of assets they hold require a high premium rate. Michael also being the only earning member of the family is an essential factor for the life coverage of him. The family has a high amount of liability and assets with them and they also estimate to pay a lump some amount for future education for their two children. Therefore, they require an insurance, which can pay out all these expenses for the future even if any mishap happens to Michael. Premium depends upon the amount of life coverage and as the life coverage is high for Michael therefore the premium rate is high as well. The high premium rate is an expense to them in the sort run but will be beneficial to them in the long run when the health will detoriate along with age. Thus it is advisable for the couple to pay high premium rate now as to get back the amount in the future due to any financial loss (Lo, 2014).
There also exists ways to reduce the premium rates by changing the terms and conditions of the contract. This process is not ideal for them as they have a high standard of living. The policy term of the contract can be reduced according the needs to decrease the premium amount. The change in the contract from the long to short contract also reduces the maturity value and thus the premium decreases. If any changes made on the type of insurance like changing the vehicle insurance from first party to third party also decreases the premium as the third party does not give any protection to the insurer against the losses. The amortization amount, decrease in the balance of the insurer also enable them to reduce the premium amount along with decrease in the net protected value (Cummins, and Santomero, 2012).
The Affordable Care Act also known as the Obamacare was introduced to provide health insurance to all the citizens of the country. The insurance will cover all the elements related to healthcare and will also have a fixed interest rate to provide free and fair services to all the sections of the society. But, it has been found that the insurance premium is increasing due to the response to the restrictions in the law like compulsory for the insurance companies to cover pre-existing conditions.
The reason behind the rise in the premium rates is due to the requirement for the organizations to cover high risk customers. The insurance firms cannot deny customers with pre existing conditions and thus cannot charge higher premium based on status of health and gender. Other factors with a few required protections, rights and other additional benefits provided by the organization to the customers are reasons for the rise in the premium rates of the insurance service (Blumenthal,and Collins, 2014). The customers with high end plans with a good income base have the biggest premium increase. The act asks the organizations to insure people with pre existing conditions along with without pre existing conditions. This is the main reason for the rise in the premium rates as the people with pre existing conditions will have higher chances for claim from the insurance companies rather than people without pre existing conditions. The insurance organization will thus face a massive loss as the pre existing condition clients will claim very frequently and the firms will be obliged to pay off. This will reduce the revenue of the firm and so to increase the profit the firms put in higher premium rates. When the rates will increase, the customer base will decrease or the government will put in restrictions to level the premium. When the insurance organizations will not get proper revenue from the market they will not get attracted to continue the business and thus resulting to the fall in the health insurance market (McCoy et al 2012).
2.According to the Obamacare, it is compulsory for every citizen to purchase a healthcare insurance for themselves so that everyone can have a safe and secured life for themselves. To ensure that every person uses an insurance product, the act has implemented penalties to uninsured people. Imposing penalties are a key component of this act, as people who are not attracted to use insurance products are compelled to buy such products. The government forcibly asks the citizens to implement insurance products for the benefit of themselves. The penalty implemented on the individuals will induce them to purchase insurance. Though implementing penalty is forcing the individuals but in a way is helping their future lifestyle (Mechanic,2012).
The value of the penalty need to be appropriate so that it puts fear in the mind of the citizens but also should not affect the financial condition of them. It needs to be adequate so that it keeps a balance between the implementation and proper financial condition of the individuals.
The above study evaluates the financial exposure to Michaela and Marry and determines the ideal insurance products and aversion of risks to help maintain a sustainable life. The amount of insurance to be paid and the process to reduce the high premium rates is also discussed.
The other part deals with the Affordable Care Act implemented by Barrack Obama, to pool in all the citizens in the insurance segment and providing health insurance to everyone. The study discusses on the hike in the premium rates due to policies of the act and also determines the amount of penalty to be implemented to the uninsured individuals.
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