Insurance and Risk Planning - the Obama Care Act - Assignment Example

Insurance and Risk Planning Students’ Name Class Name Tutor’s Name School City and State Date Insurance and Risk Planning 1. Potential losses ignoring the impact of inflation; personal losses, liabilities and property. House mortgage amount outstanding: $310,000 + $28,700 Credit card: $8000 Cars (2 vehicles): $100,000 House contents: $90,000 Shareholding: $34,000 Superannuation -conservative fund: $250,000 Savings account with Westpac Bank: $200,000 Westpac Bank - 650 shares + c Pivot - 15,000 shares: $66,000 Superannuation -conservative fund: $50,000 Living expenses assumed per annum Rates: 2,000 Household (food, clothes): 49,000 Utilities (telephone, electricity, gas, water): 7,000 Car running expenses: 3,000 Entertainment: 15,500 Annual holidays: 10,000 Work related: 3,000 Total Potential losses total amount to $887,500 2. According to the funeral arrangements, we are assuming that in case one of the couples dies prematurely, the living expenses are going to go down by 25% The living expenses amount to about $89,500 These are decreased to $67,125 Therefore, it would be $798,000 total plus the new living expenses $865,125 3. Techniques available to manage risk exposure Risk is about the adverse economic and social impact, which is provided by uncertainty as well as unexpected events beyond the political and managerial controls, which have been set. A society usually ignores the environment can be taken by surprise at the time when a disaster happens. However, if the individual, enterprise, or society recognizes the potentially adverse events and tries to stipulate the causes and events, then it will not be taken by surprise to the same extent. Considering the same ingenuity, then it could be able to reduce the downsides associated with the uncertainty in this case. The more effort one, the interested party, regardless of the category, devotes to the understanding and mitigation of causes of the adverse events, the more it can be able to reduce the element of surprise. Some of the methods both Michael and Marry use to manage the risk exposure are included in the following text. The first thing to do is have risk acceptance. When the potential loss that comes from risk is less than the cost of implementation of a risk mitigating control; both Michael and Marry have to access the acceptable risks and move on to the other unacceptable risks. They have to monetize the potential cost of the reputational damage or loss of the public or regulatory goodwill in their calculations. Some of the acceptable risks for the couple in this case would include the savings account, mortgage, and Westpac Bank - 650 + c Pivot shares. The unacceptable expenses or risks rather would be the annual holidays, entertainment expenses, and the running expenses that require unnecessary spending of the available resources. Marry and Michael needs to use the risk in order to enable the business development. The launching of innovative new products to manage the risk levels of the business. Now the technology risk management professionals usually start down the road of proposing the implementation for the new controls without the examination effectiveness. Most of the time, the existing controls need to be upgraded to reduce the risk in order to an acceptable level without undertaking these costly developments. 4. Insurance products to manage the couple’s risk exposure. There are a number of agreements and structures, which have been developed over the past several years which instructions to leverage capital markets. Risk transfers describes the process by which an institution enters a contract with one or more instruction enters into a contract with one or more institutions for the means of buying or selling exposure to some of the reference pools for the purpose of collateral (James, 2015). Both Marry and Michael may accurately quantify the credit risk exposure in the structure for the determination of the financial benefit by entering the contact. Risk Transfer Both Marry and Michael can decide that the enterprise to afford to absorb some a loss because the frequency as well as the probability is low considering the dollar value of the losses is manageable. For example, a firm owns several business vehicles. The drivers have a good excellent safety record; exposure to collision is low. If an accident damages 5. Both Michael and Marry need to know that managing the risk exposures effectively is an essential element of the financial strategy. Project risks and risk treatment are continuously communicated to the relevant project stakeholders in order to make sure they are aware of the status of the risks. In this context, both communication and consultation processes are to be developed at an early stage. there should be focus on the effective internal and external communications to make sure that those who are tasked with implementing the management process as the stakeholders, understand the basis that decisions are made and the reasons why specific decisions are made. Risk communications and consultation should be integrated into the communications framework, which is usually a crucial part of the project management plan (Rossi, 2014). The establishment of context is the process, which incorporates the recognition of specific risks existing and defining characteristics and drivers. It also means the establishment of risk criteria. When establishing the context, one should ask how the particular context fits into the risk management process. When addressing both internal and external context, it is crucial to ensure stakeholder concerns regarding risk are adequately addressed. The project management process has a corresponding risk management process. Here, there are various terms that have to be examined like initiation of project opportunity assessment; this is the examination of the high-level requirements of the project opportunity in order to define risks versus the opportunities to make a decision to proceed with the endeavor or not (Royer, 2002). There is also planning: risk management planning which entails the identification of risks and development of mitigation strategies. Project risk management as a component of the project management process entails how the project management team gets to perform risk assessment and monitoring pertaining to their project. It does involve the process of identifying project risk. The aim of the risk management plan would be to make sure that the risk management protocols, which are used on the project, are corresponding with both the risks and the importance of the project to the relevant organization, market and the clients in general. Establishment of this relationship early on ensures that every member of the project management team is using the same methods when evaluating risks and makes sure the risk management process is within the appropriate budget. Part B The Obama-care had two main goals for Americans; the first one was to reduce the number of uninsured Americans who could not receive the necessary health services because they cannot afford to pay for it. There is also the case of underinsured Americans who could still not access full services in hospitals. The cost of accessing medical services and the general health premiums had gone high in America. The Obama care aimed to have more Americans fully insured and in turn keep the cost of medical services low by having insurance firms spread their medical expenses to the larger masses. There is a feeling in the Obama care deal that if many Americans are insured and they take advantage of their coverage to visit Primary care physicians (PCP) very often, and the PCPs might detect serious diseases like cancer on time before they become chronic and costly for the consumers and insurers. However, insurers in America feel duped by the healthcare in many ways, and this articles looks at their arguments against the health care. Overhanging the Young Americans The first arguments of the insurers are that their premiums benefits will not look attractive as they had been advertised earlier and this makes them look like fraudsters. In order for the insurance firms to decrease premiums, there ought to be a lot of participation from the healthy young Americans. According to the community ratings provisions of the act, young people will have to pay higher premiums according to the law than they y would in the normal actuarial based insurance system. This does not seems fair considering that young adults comprise a large number of the healthy citizens and all they need is just a catastrophic insurance. The Obama care on the other hand demands that this group need to adopt a comprehensive and more expensive coverage. Empirical evidence reveals that premiums for the young Americans are generally higher in the health act (Sudderman, 2013).According to the act; economically rational young citizens will not have to pay the high premiums until they are sick. It is only at that point of illness that it will be reasonable for them to purchase the policy. This brings an understanding that only old and sick Americans will have to purchase the Obama care policies. If only old and sick Americans are participating, then the cost of premiums will definitely go high and this will give them a feeling that they also do not have to purchase the policy until they are sick just like the young citizens. This kind of analogy that the Act gives will lead to a situation where there will be few healthy participants in the act. When the number of healthy participants reduces, the premiums will go high because only sick individuals will be purchasing the policy. This situation will lead to bankruptcy of the insurance companies that has to insure all their applicants (AoN, 2015). The second major issue that opposes have against the policy is the imposition of price control that it is going to put on the medical structures for it to reduce costs and look affordable. The act is aiming to control the remuneration of medics, medical procedures, and hospital fees. In the history of Americans systems, the control of prices has had numerous failures. There have been such attempts on the price on food, Another huge problem that American insurance companies have against the ac is the fact that it is forcing every citizen to have a medical cover and enforcing a penalty on those without. Imagine a situation where congress decides to pass a law that obliges every citizen driving cars in America to use a hybrid engine in their machines. A citizen concerned about the consumption of fossil fuel might find such a law useful but anyone who has bought cars knows that hybrid cars are more expensive than the conventional ones. Obama care is doing exactly the same thing to health insurance especially for the citizens who buy it on their own. The law is forcing all the insurance companies to charge the same rate to either the sick and healthy Americans. The law is obligating all the insurance firms to cover medical services that according to the government, are “essential” like drug addiction therapy, which the government assumes is not necessary. The forcing of young people t pay more according to the law is in order to subsidize the elderly. According to me, there is nothing like free lunch in this life and all these legislation in the act make health insurance to be very expensive. Leaders in the political and social circles are equally concerned about this law. The AFL-CIO have passed a resolution complaining that the Act’s litany of taxes is likely to push administered plans and many other procedures that cover workers in union to unsupportable levels. According to a few researches that have been done specially those, targeting cost of the whole act, in many states, the cost of a single individual purchasing a cover is likely to increase by 160percent. Very few states will see the cost go down. In the national level, it is estimated that the care is going to increase premiums in the insurance market by an average of 24 percent (Sudderman, 2013). Penalty and individual mandate Poor Americans are likely to be protected from the hike in the Obamacare’s subsidies but the Americans in the middle class are going to feel the high charges effect, the high premiums, along with high taxes that will be required to pay for the subsidies that the low class will receive. The young Americans are going to be hit hard in this act. Something that most Americans despise in the cat is the issue of “single mandate” which is forcing them to purchase the health insurance. This can be understood because nobody likes being pushed into something and this part of the Act is what might be Americans feel suspicious about this whole deal. The act requires everybody to buy a health cover or else face a penalty inform of a “tax”. The idea of having to pay for a cover by force has been used by republicans as an opposition tool against the government, may Americans feel that any legislations passed should be flexible enough and allow those not willing to opt out. Some sections of the public feels that this part of the law is a huge constitution violation and that services like insurance covers are business-oriented and the government cannot pass laws mandating even the non-working citizens to take a cover. On personal level, I agree to a large percentage on those opposing this part of the law that the act should have been flexible enough because insurance covers are not laws to be followed by everybody. (Lott, 2013) The existing insurance policies that do not go parallel with the Obamacare policies have been banned and this pains a group of affluent citizens who had invested heavily in the act. The president Obama had made a misleading promise that people will be given an option of maintaining their old policies. However, the president has turned around, said that the people will not have their old policies back, and even further commented that it is not his fault. State officials can easily find themselves answerable to the law if Obamacare is not offered to the sick and such an approach has received some resistance from the government officials. This law is using a lot of force on the in its adoption. The law has put price controls that obliges all the insurance firms selling their services to the sick at a lower budget than what costs to insure them, this means that insurers who give the best cover will attract a lot of patients, and suffer losses for it. Premiums are definitely going to rise, and the citizens who are not sick will avoid it all together. The community-rating price of the act is seen as punishing the insurers with good health plans that seems attractive to the masses. The insurers might thus resort to low budget health plans that avoid, mistreat and avoid vulnerable patients. This will make insurers lower their standard of services so as not to run into losses Conclusion The Obama care act is a legislation surely based on good intentions by the president to offer cheap and quality medical cover for all the citizens. What many Americans have against the act are simple violations on their freedom to choose which the act provoked by demanding that every citizen has to adopt the cover. The act can work if some parts are revised in order to fit the requests of the insurers, medical professionals, the citizens, and the government at large. Insurers are going to be forced to adopt “tactics” of avoiding losses if the act starts full operation. This will mean that they have to give substandard cover to avoid losses References Royer, P. S. 2002. Project Risk Management: A Proactive Approach. Management Concepts Incorporation. Print. Lott, j 2013. Why insurance companies who follow the Obamacare ‘fix’ could face legal troubles. Retrieved on 3rd October, 2015 from: http://www.foxnews.com/opinion/2013/11/15/why-insurance-companies-who-follow-obamacare-fix-could-face-legal-troubles.html Suderman, P 2013. 6 reasons why state should continue to oppose Obamacare. Retrieved on 3rd October, 2015. Retrieved from: https://reason.com/archives/2013/04/17/6-reasons-states-should-continue-to-oppo:9 Rossi, C. 2014. Fundamentals of Risk Management. Wiley & Sons. Print. AoN. 2015. Aon Risk Management Solutions. Retrieved from http://www.aon.com/risk-services/products-services.jsp James, J. 2015. 5 Ways to Minimize Risk Exposure. Evantix. Retrieved from http://blog.evantix.com/blog/bid/41917/5-Ways-to-Minimize-Risk-Exposure Read More