In this lesson students will learn about the basic components and terminology of individual health insurance. Students will make decisions about the value of insurance protection and you will identify trends in the cost of medical care in the United States.

KEY CONCEPTS

Budget, Choice, Consumer Economics, Cost/Benefit Analysis, Insurance, Opportunity Cost, Trade-off

STUDENTS WILL

  • Define basic components and terminology of individual health insurance.
  • Make decisions about the costs and benefits of health insurance protection.
  • Identify trends in the cost of medical care in the United States.

INTRODUCTION

legIntroduce the lesson by telling the students about an old custom from the theatrical world: It's great to hear somebody say "Break a Leg" if you're an actor about to start a performance. It means that somebody is wishing you good luck. But what if you really did break a leg?

Who would pay for the costs related to your accident?
What might the cost be?
What could you do to reduce your personal financial liability?
What are the potential costs and benefits of medical insurance?
What are the trends in the cost of medical care in the United States?

RESOURCES

PROCESS

Billy Boarddude was doing an "ollie" while next-door neighbor Homer Smith was walking his dog. Sadly, Homer didn't hear or see Billy in time to avoid the crash which broke Billy's leg.

ollieBilly called 911 from his cell phone and was taken to the ER at the local hospital. Five days later, Billy was released to return home. It would be six long weeks until he could "ollie" again.

Before leaving the hospital, Billy's Mom and Dad went to the hospital's business office to get their bill. In the car on their way home, they told Billy that he would have to give up the board and get a job to help his folks pay for the $20,000 bill.

If Billy's parents had no health insurance they would be liable for the whole amount, but for this lesson, we will assume they did have insurance.

  1. The students should have already read the article Health care Costs are Up Here are The Culprits , before beginning this lesson.
     
  2. The students will visit the following sites How Major Medical Insurance Works and How Insurance Works to read about how health insurance works. For a more refined look at how health insurance works using the North Dakota Blue Cross Blue Shield as an example.
     
  3. Have the students fill out the Break a Leg worksheet about different scenarios of several insurance policies Billy's parents might hold. Have the students visit this Health Insurance Glossary for definitions of terms they will come across in the worksheet's different scenarios.insurance

  4. Have the students draw conclusions about their view of the importance of insurance policies after they complete the exercises in the worksheet. Ask the students to consider what they have read about health care costs and ask them if this knowledge makes them feel less inclined to take risks. Ask them if practicing "risk aversion" would be a good practice to keep health insurance costs down.
     
  5. Instruct the students to read the article Facts on Health Care Costs to find facts about what the average American pays for health insurance and for a brief history and summary of major problems plaguing the health care system.

Finally, have the students go to the Health Insurance Center . There they can get quotes on how much health insurance would cost for them.

CONCLUSION

The students should be able to answer the questions using information from the readings as a basis for their answers:

 

 

Answers:

  1. Should a family budget money for the purchase of an individual health insurance policy? [The answer depends on each family's circumstances, of course, but for many families the obvious answer is yes, money should be budgeted for health insurance. Many jobs do not offer health insurance, or if they do, it comes at a very high price. Millions of families have no insurance, yet ultimately bills have to be paid. In some cases hospitals also pass some charges on to state and Federal agencies and hospitals also "absorb" some costs themselves. But, in the end, consumers who are able to pay either out-of-pocket or with insurance are forced to defray costs for other consumers who are not able to pay by paying higher rates for all services.]
     
  2. What are co-payments? [A co-payment is an amount of coverage that is shared in some ratio between the insured and the insurer.]
     
  3. What are deductibles? [A deductible is an amount paid by the insured after enough claims have been filed to "meet" or exceed the deductible amount. After the deductible has been met, coinsurance or shared responsibility for claims goes into effect. Insured and insurer share payments up to preset limits.]
     
  4. What are covered expenses? [Covered expenses are those expenses the insurer has agreed to pay in the policy with the insured.]
     
  5. What are claims? [Claims are requests for payments by the insurer to the insured or his agents (doctors, hospitals, etc).]
     
  6. What are exclusions? [Exclusions are exceptions to coverage agreed to in the policy contract between the insurer and the insured.]
     
  7. What are premiums? [Premiums are payments made by the insured to the insurer for coverage agreed to in the contract.]
     
  8. Do U.S. consumers spend too much on health care and receive less benefit from those expenditures than we should?
    [Opinion Answer]

ASSESSMENT ACTIVITY

Answer the questions based on the information you have viewed in the various web sites:

Answers:

  1. What are three reasons for the extraordinarily high health care costs in the United States?[Answers include an aging population, new and very expensive technology and related personnel costs, increased paperwork and inefficiency in processing such, medical fraud and malpractice and a system focused on treatment not prevention, etc.]
     
  2. What percentage of U.S. Gross Domestic Product (GDP) is devoted to health care? [13.5 % of GDP is devoted to health care.]
     
  3. Why does the United States have a shortage of primary care physicians? [Insurance firms, drug companies, small business operators, labor unions, Medicare beneficiaries, physicians]
     
  4. How might that shortage contribute to inflation in the United States?
    [A shortage would increase the cost of primary care and individuals bid up prices in response.]
     
  5. Does the United States provide universal health care coverage for its citizens? [No, the United States does not provide universal health care coverage for its citizens.]
     
  6. Should the United States provide universal health care coverage for its citizens?
    [Opinion Answer]
     
  7. What might have to happen to force change in United States Health care policy? [An event like a war, a depression, or widespread civil unrest might have to happen to force change in the United States Health care policy.]

EDUCATOR REVIEWS

  • “This site offers great services.”

    Frank Johnson   POSTED ON July 15, 2005

  • “It is very important to be insured because you don't know what will happen tomorrow. Before stepping ahead, be sure you are well informed about your health insurance, what offers you and how expensive it will be, co-payments, deductibles, covered expenses, claims, exclusions, and premiums.”

    Neli Torres, Alma   POSTED ON November 9, 2006

  • “Very nice site!”

    Anonymous   POSTED ON October 12, 2007

  • “Great site to learn about how health insurance works.”

    Edwardo O., Brownsville, TX   POSTED ON April 8, 2009

  • “Great way to learn about the health care system.”

    Rose O, La Feria, TX   POSTED ON November 18, 2009

  • Review from EconEdReviews.org

    Lots of higher level reading. Links not set to actual articles.

    “If you are going to use this lesson I suggest the students have a good background of what insurance is and the different types before beginning with this. It has good information, but difficult to use. This lesson has lots of links to other websites, but not all of them will link you directly to what it is they want you to read. I found many of my students off task trying to locate or find what they needed to read because of that. The reading itself is also higher level. It may be best to print off several of the articles and group students to read and discuss then share with the class. ”

    Amy B   POSTED ON July 31, 2008

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