Concept Check 9-1 (p. 241)

1.      What is health insurance?

Health insurance is a form of protection with a primary purpose to alleviate the financial burdens suffered by individuals because of illness or injury.

The purpose of health insurance is to reduce the financial burden due to illness or injury. (p. 240)


Concept Check 9-2 (p. 245)

1.      What three types of coverage are included in the basic health insurance?

Hospital expense coverage; surgical expense coverage; and physician expense coverage (p. 241)


2.      What benefits are provided by


Hospital expense coverage? 

Pays for some or all of the daily costs of room and board during a hospital stay; routine nursing care; minor medical supplies; and the use of other hospital facilities. (p. 242)


Surgical expenses coverage? 

Pays for all or part of the surgeon’s fees for an operation. (p. 242)


Physician expense coverage? 

Meets some or all the costs of physician care that do not involve surgery.  It covers routine doctor visits, x-rays, and lab test. (p. 242)


3.      Match the following terms with an appropriate statement.


a.   Requires the policyholder to pay all costs up to a certain amount.



b.      The percentage of medical expenses you must pay.


hospital indemnity policy

c.   A policy used as a supplement to basic health or major medical policies.

     hospital indemnity policy

exclusion and limitations

d.      Defines who is covered by the policy.



e.   Specifies services that the policy does not cover.

      exclusions and limitations


f.    A flat fee that you pay every time you receive a covered service.



Concept Check 9-3 (p. 247)

1.   As you decide which health insurance plan to buy, what trade-offs would you consider?

Reimbursement versus indemnity; internal limits versus aggregate limits; deductibles and coinsurance; out-of-pocket limits; and benefits based on reasonable and customary charges. (p.         246)


2.   Match the following terms with an appropriate statement.


a.   A policy that will cover only a fixed amount or a expense.

      internal limits


b.   A policy that pays you back for actual expenses.


internal limits

c.   A policy that provides you with specific amounts, regardless of how much the actual expenses may be.

      indemnity policy


d.   After you have reached a certain limit, the insurance company covers 100 percent of any additional costs.

      out-of-pocket limit

out-of-pocket limit

e.   The set amount you must pay toward medical expenses before the insurance company pays benefits.


3.   What basic features should be included in your health insurance plan?

The plan should offer basic coverage for hospital and doctor bills; provide for at least 120 days hospital room and board in full; provide at least $1 million lifetime maximum for each family member; should not impose unreasonable exclusions. (Exhibit 9-1, p. 247)


Concept Check 9-4

1.   What are the six sources of private health plans?

Private insurance companies; hospital and medical service plans; HMOs, PPOs, home health care agencies; and employer self-funded health plans. (pp. 248-250)


2.      Match the following terms with an appropriate statement.

Blue Cross

a.   A medical assistance program offered to certain low-income individuals and families.


Blue Shield

b.   Combines features of both HMOs and PPOs.

      point-of-service plan (POS)


c.   Statewide organization that provides hospital care benefits.

      Blue Cross


d.   A federally funded health insurance program available mainly to people over 65 and to people with disabilities.


point of service (POS)

e.   A health insurance plan that directly employs or contracts with selected physicians to provide health services in exchange for a fixed, prepaid monthly premium.



f.    A statewide organization that provides benefits for surgical and medical services performed by physicians.

      Blue Shield


g.   A group of doctors and hospitals that agree to provide specified medical services to members at prearranged fees.



3.      What health care services are not covered by Medicare?

Certain types of skilled or long-term nursing care; out-of-hospital prescription drugs; routine checkups; dental care; and most immunizations. (p. 252)


Concept Check 9-5

1.   What is the purpose of disability income insurance?

It provides regular cash income when a person is unable to work because of a pregnancy, a non-work related accident, or an illness.  It protects one’s earning power.  (p. 253)


2.   What are the four sources of disability income?

Worker’s compensation; employer plans; Social Security; private income insurance programs. (p. 255)


3.   Match the following terms with an appropriate statement.

waiting or elimination period

a.   A specified period during which benefits are paid.

      duration of benefits

duration of benefits

b.   A plan that guarantees coverage as long as you continue to pay your premiums.

      guaranteed renewability

guaranteed renewability

c.   A period of one to six months that must lapse before benefits can be collected.

      waiting or elimination period (p. 255)



1.      Larry and Liz are a young couple both working full time and earning about $50,000 a year.  They recently purchased a house and took out a large mortgage.  Since both of them work, they own two cars and are still making payments on them.  Liz has major medical health insurance through her employer, but Larry’s coverage is inadequate.  They have no children, but they hope to start a family in about three years.  Liz’s employer provides disability income insurance, but Larry’s does not.  Analyze the need for health and disability insurance for Liz and Larry.

Larry probably does not need health insurance because he is covered through Liz’s employer-sponsored health insurance plan.  However, Larry should obtain disability income insurance and possibly a decreasing term insurance.


2.   Pam is 31 and recently divorced, with children ages 3 and 6.  She earns $28,000 a year as a secretary.  Her employer provides her with basic health insurance coverage.  She receives child support from the children’s father, but he misses payments.  Her ex-husband is responsible for the children’s medical bills.  Analyze the need for health and disability insurance for Pam.

Since Pam’s ex-husband is responsible for the children’s health care bills, she does not need additional health coverage, but she should purchase disability insurance.


3.   The Kelleher family has health insurance coverage that pays 80 percent of out-of-hospital expenses after a $500 deductible per person. If one family member has doctor and prescription medication expenses of $1,100, what amount would the insurance company pay?

The insurance company would pay .80  $600 = $480.


4.   A health insurance policy pays 65 percent of physical therapy cost after a $200 deductible. In contrast, an HMO charges $15 per visit for physical therapy. How much would a person save with the HMO if they had 10 physical therapy sessions costing $50 each?

Cost with health insurance: $200 deductible (first 4 sessions) + 35 percent  $300 (next 6 sessions) = $305

Cost of HMO: 10 sessions  $15 = $150

Savings of $155 with HMO


5.      List the benefits included in your employee benefit package, such as health insurance, disability income insurance, and life insurance.  Discuss the importance of such a benefit package to the consumer.

Students responses will vary, but take this opportunity to emphasize that employer-sponsored health insurance, disability income insurance, and life insurance are an important part of financial planning.

6.      Visit the Social Security Administration’s Web page to determine your monthly Social Security disability benefits should you become disabled in the current year.  Or call your Social Security office to request the latest edition of Social Security: Understanding the Benefits.

The purpose of this project is to provide students with the latest information available from Social Security Administration on disability benefits.  This information is updated on the Web and Social Security: Understanding the Benefits publication every year in January.


7.      Obtain sample health insurance policies from insurance agents or brokers, and analyze the policies for definitions, coverage, exclusions, coverage limitation, and amount of coverage.  In what ways are the policies similar?  In what ways do they differ?

Students will find that most insurance companies will have the same major clauses, but different coverage for different amounts of insurance.  The premiums for the same coverage may vary widely.


8.   Visit the following Web sites to gather information about various types of health insurance coverage.  Prepare a summary report on how this information may be useful to you.

a.   Healthfinder (

b.      Medline (

HEALTHFINDER—A gateway site to help consumers find health and human services information quickly. HEALTHFINDER includes links to more than 1,250 Web sites, including more than 250 federal sites and 1,000 state, local, not-for-profit, university, and other consumer health resources.  Topics are organized in a subject index. With more than 7 million hits in its first two months of operations, HEALTHFINDER is currently rated fifth among consumers’ favorite Web sites on the “Web 100” list.

MEDLINE—The world’s most extensive collection of published medical information, coordinated by the National Library of Medicine.  Originally designed primarily for health professionals and researchers, MEDLINE is also valuable for students and for those seeking more specific information about health conditions, research, and treatment.  Free access to MEDLINE was initiated June 1997. “PubMed,” a free-online service, provides direct Web links between Medline abstracts and the publishers of full-text articles.


9.   Visit the National Health Information Center’s Web page (  The NHIC is an online directory of more than 1,400 health-related organizations that can provide health care information. Report the types of health insurance and health care available to consumers.


With more than 60 central World Wide Web sites on eight separate Web domains, the Department of Health and Human Services presents one of the riches and most reliable sources of information on the internet.  HHS documents on the web include information on health and social issues, research-related data, and access to HHS services, including interactive sites.

For health information especially, the HHS sites are a unique resource.  Consumers and professionals alike can find extensive health information, including data produced or supported by HHS agencies, as well as links to other information from sources that have been found reliable by HHS experts. It has been estimated that more than 10,000 health-related sites are on the Web.  HHS Web sites and gateways can shorten searches and produce reliable information.


10.  Write to the Centers for Medicare and Medicaid Services, Baltimore, MD 21207, and ask for the latest edition of Guide to Health Insurance for People with Medicare.  On the basis of the information contained in this source, describe the changes that have been made in the hospital insurance and medical insurance provided by Medicare.

This booklet is available free of charge and is full of much useful information for people with Medicare coverage.  Let students discover what changes have been made since the publication of this textbook.


11. Georgia Braxton, a widow, has take-home pay of $600 a week.  Her disability insurance coverage replaces 70 percent of her earnings after a four-week waiting period. What amount would she receive in disability benefits if an illness kept Georgia off work for 16 weeks?

$600 x .70 = $420 a week

$420 x 12 weeks = $5020 total.

Internet Connection (P. 259)

After obtaining the data, students should be able to complete the worksheet and answer the questions.


The U.S. Census Bureau collects a wide variety of data about the people and economy of the United States.  Health insurance coverage is one of the many surveys the bureau completes each year.

Locate the Health Insurance section of the U.S. Census Bureau Web site. Complete the worksheet below and answer the questions that follow.



U.S. Census Bureau Web site address


For what year is the most recent health insurance coverage survey presented?


In the most recent health insurance survey, how many people in the United States were without health insurance coverage?


What populations (age or race) are less likely to have health insurance?


How many children under the age of 18 have no health insurance according to the most recent health insurance data?



Case in Point (p. 260)


1.   Do you think Kathy’s father was planning wisely for the welfare of his family?  Can you suggest ways in which this family could have cut monthly expenses and thus set aside some money for more insurance?

It does not appear that Kathy’s father was planning wisely for the welfare of his family.

The family could cut monthly expenses for recreation, entertainment, and vacation trips so as to buy additional health insurance.


2.      Although Mr. Jones’s salary was not big enough to buy insurance for all possible risks, what protection should he have had at this time?

At the very least, Mr. Jones should get a basic health coverage and a major medical supplement to protect the family.


3.   Suppose Mr. Jones had been seriously injured and unable to work for at least one year.  What would his family have done? How might this situation have affected his children? 

If Mr. Jones had been seriously injured and unable to work for at least one year, his family would have suffered a financial and emotional tragedy.


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