Essentials of Business Law, 9th edition
INSTRUCTOR’S MANUAL
Chapter 37 Health Care Law
LESSON OVERVIEW
While the previous chapters dealt with business and the environment, Chapter 37 deals with health care
law. This chapter examines some of the major areas of the law impacting health care. It also discusses
the purpose of an advanced directive, along with its two most common types and the different types of
medical insurance available to individuals and employees. Additionally the chapter discusses the major
provisions of the Patient Protection and Affordable Care Act of 2010, and the major provisions of the
privacy rule in the Health Insurance Portability and Accountability Act of 1996. Finally, students’
understanding of the topics is evaluated through objective-type questions, discussion questions, and
case scenarios. Students are encouraged to conduct their own research through the use of the Internet
and other sources.
CHAPTER OUTLINE
A. INTRODUCTION (p. 618)
B. ADVANCE DIRECTIVES (pp. 618-620)
1. Living Wills (p.619)
2. Durable Power of Attorney for Health Care (p.620)
3. Matters Covered by Advanced Directives (p. 620)
C. TYPES OF MEDICAL INSURANCE (p. 620)
1. Community-Based Insurance (pp. 621-623)
2. Major Medical (p. 621)
3. Commercial Insurance (p. 621)
4. Self-Insurance (p. 621)
5. Health Maintenance Organization (p. 622)
6. Medicare (p. 622)
7. Medicaid (p. 623)
D. HEALTH-RELATED EMLOYESS BENEFITS (pp. 623-625)
1. Medical Insurance (p. 623)
2. Family Plans (p. 624)
3. Disability Insurance (p. 624)
4. Dental Insurance (p. 624)
5. Vision Insurance (pp. 624-625)
6. Group Life Insurance (p. 625)
E. THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010 (pp. 625-626)
F. THE HELATH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996
PRIVACY RULE (pp. 626-627)
KEY TERMS
Key terms are listed at the beginning of each chapter, posted in the student textbook margins, and
placed in bold in the copy. They are listed here for your quick reference.
§ Health care law (p. 618)
§ Advance directive (p. 618)
§ Living will (p. 619)
§ Durable power of attorney (p. 620)
§ Community based insurance (p. 621)
§ Deductible (p. 621)
§ Medicare (p. 622)
§ Medicaid (p. 623)
§ Cafeteria plans (p. 623)
§ Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) (p. 623)
§ Disability insurance (p.624)
§ The Patient Protection and Affordable Care Act of 2010 (PPACA) (p.625)
§ Health Insurance Portability and Accountability Act of 1996 (HIPPA) (p. 626)
§ Major medical (p. 621)
§ Health maintenance organization (p. 622)
LEARNING OUTCOMES
The chapter Learning Outcomes will help you and the students discover the concepts and information
that should be understood upon completion of the chapter. You may want to access the PowerPoint
(PPT) slides for Chapter 37 when you begin the study of the chapter and discuss each Learning
Outcome. Each Learning Outcome will be covered separately in the Instructor Notes, but they are
shown here in total as an overview of the sections being presented in Chapter 37. The corresponding
text page numbers and PPT slides are listed next to each outcome. These slides should be used to
reinforce the main points of the lecture.
After completing this chapter, the students will be able to:
1. Identify some of the major legal areas that impact health care. (p. 618, PPT slides 2-3)
2. Explain the purpose of an advance directive and discuss the two most common types. (pp.
618-620, PPT slides 4-9)
3. Describe the different types of medical insurance that are commonly available to individuals and
employers. (p. 620-623, PPT slides 10-18)
4. Describe six types of health-related insurance benefits typically available to employees. (pp.
623-625, PPT slides 19-25)
5. Explain the major provisions of the Patient Protection and Affordable Care Act of 2010.. (pp.
625-626, PPT slide 26)
6. Explain the major provisions of the privacy rule in the Health Insurance Portability and
Accountability Act of 1996. (pp. 626-627, PPT slide 27)
LECTURE OUTLINE
A. INTRODUCTION
Health care law is the federal, state, and local statutes, rules, regulations, and judicial decisions that
govern the legal relationships of patients, physicians and other medical professionals, and health care
insurers to one other. Administrative law, contract law, and medical malpractice all impact health care
law.
B. ADVANCE DIRECTIVES
Many are opposed to their and their loved ones’ lives being prolonged by artificial life support when
there is little chance of recovery. States have enacted statutes allowing individuals to execute an
advance directive documenting their express wishes regarding their health care if they become
incapacitated or permanently unconscious without hope of recovery. Generally, individuals executing
an advanced directive must demonstrate they are competent and sign the directive in the presence of a
specified number of witnesses. The directive takes effect when the individual becomes incapable of
making treatment decisions which, in some states, must be confirmed by at least two licensed
physicians. An advance directive does not expire, but becomes invalid when the individual changes it
or issues a replacement directive.
1. Living Wills is a document in which a person directs his or her physician and/or
health proxy to forgo certain extraordinary medical procedures if the person is dying or
permanently unconscious.
2. Durable Power of Attorney for Health Care is a document that appoints an
individual as an agent with authority to make health care decisions on behalf of the
principal in the event that the principal becomes incompetent.
3. Matters Covered by Advanced Directives – The living will and durable power
of attorney provide individuals with the opportunity to articulate instructions regarding
their medical care in the event they develop a terminal medical condition rendering them
permanently unconscious. Depending upon the law of the state where the individual
resides, these documents guide their agent’s decisions regarding health care treatment.
Matters that may be addressed in the living will, and administered by the agent pursuant
to a durable power of attorney, include the individuals request that an autopsy be
performed upon death, the manner of the disposition of the individual’s remains, and
wishers regarding organ donation
C. TYPES OF MEDICAL INSURANCE
Many individuals purchase health insurance, individually or through an employer, to protect
themselves against financial loss resulting from serious illness or injury. The relationship between the
individual or employer and the insurance company is governed by contract law and applicable federal,
state, and local laws. Individuals lacking insurance coverage run serious risk of financial ruin. The
most common forms of medical insurance available are –
1. Community-Based Insurance is medical insurance programs provided by Blue Cross and Blue
Shield.
a. Blue Cross covers an individual’s hospital expenses. The patients generally
pay a deductible, along with an additional portion in excess of deductible.
b. Blue Shield covers an individual’s costs for surgery and other medical
procedures.
2. Major Medical is a form of health insurance that covers serious illnesses and
lengthy hospitalizations, which generally takes effect after other benefits are exhausted.
3. Commercial Insurance is medical insurance that is very similar to community
based; however, patients and employers purchase these insurance policies from private,
often for profit, companies.
4. Self-Insurance is medical insurance coverage is provided by an employer. The
employer undertakes risk, paying employees’ medical expenses out of its own funds.
The risk justified if employer has sufficient resources to cover large number of
employees in better health than overall population.
5. Health Maintenance Organization Is an organization providing health
insurance by coordinating services with specific doctors, hospitals, and other health care
providers. Employer with 25 or more employees offers traditional health care insurance,
under the Health Maintenance Organization Act of 1973 , employer must also offer
HMO. Under HMO, doctors and other health care providers agree to render services
according to HMO guidelines. Patient selects primary care physician, who tends to
routine health care. If patient needs specialist obtains referral.
6. Medicare is a federal program that pays for specified health care expenses for
individuals 65 or older and to persons with disabilities and certain other individuals. It
is divided into four parts: Part A covers hospital bills; Part B covers both physicians’
fees and bills for medically necessary medical devices; Part C provides an option to
choose from a variety of health care plans; Part D covers prescription drugs. The Donut
hole refers to difference between expenses covered in Parts A, B, and C, and lower limit
in catastrophic prescription drug coverage under Part D. Medigap supplemental
insurance covers difference between expenses reimbursed by Medicare and total charge.
Approximately 15 percent of the U.S. population is covered under Medicare
7. Medicaid is a federal health care program for certain individuals and families
with low incomes. It is funded jointly by both the federal and states’ governments and is
administered by the states. Approximately 17 percent of the U.S. population covered
under Medicaid.
D. HEALTH-RELATED EMLOYESS BENEFITS
To attract and retain employees, employers offer workers benefit packages which may include vacation
time, personal and sick days, pensions, other retirement benefits, child care, leaves of absences, tuition
remission, legal insurance, and even employee discounts. Since benefits are costly, employers allocate
money for each employee who then selects benefits suiting their individual needs. These arrangements
are referred to as cafeteria plans. Some common health-related benefits offered by employers are –
1. Medical Insurance includes community-based, major medical, commercial insurance,
self-insurance, and HMO. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
provides employees and their families who lose employment health benefits the right to elect to
continue group health benefits for specified period. Under COBRA employees may be required to pay
entire premium, up to 102% of the plan cost.
2. Family Plans are where employer elect to procure a family medical plan providing coverage to
the employee, the employee’s spouse, children, and other dependents. Frequently, coverage between
two working spouses who are both covered is coordinated.
3. Disability Insurance provides supplementary income for lost wages due to illness or accident
preventing employee from working. The disability may be long term or short term, and may be
permanent or temporary. The benefits are usually provided on monthly basis to allow employee to
maintain standard of living while paying customary expenses.
4. Dental Insurance usually covers procedures such as cleanings, fillings, root canals, etc. It
usually covers up to a specified dollar limit which is usually about $1,000. Major surgery is generally
covered under other forms of medical insurance, rather than dental insurance.
5. Vision Insurance usually covers eye exams, corrective lenses, and contact lenses. Employees are
covered for each of these up to a specified dollar amount. Major eye surgery is covered under other
forms of medical insurance, rather than vision insurance.
6. Group Life Insurance covers employees’ beneficiaries if there is loss of the employee’s life. At
times, the coverage extends to other events, such as critical or terminal illnesses. Premiums for group
life insurance are relatively inexpensive and coverage is usually for one or two time’s employee’s
salary. Approximately 95 percent of employees with cafeteria benefits select group life insurance
coverage as part of employee benefits package.
E. THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010 Is federal law
mandating that all individuals have minimal essential health insurance coverage, unless have employer
or government plan. Individuals not complying must pay a penalty, although financial hardships or
inconsistent religious convictions are exempt from compliance. State health insurance exchanges are
required where businesses purchase policies, compare premiums and features. The same premiums are
paid by individuals of the same age and location, there are no exclusions for pre-existing conditions,
nor are there annual or lifetime benefit caps. Any group health insurance plans must provide coverage
for dependents until age 26.
F. THE HELATH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996
PRIVACY RULE is a federal statute providing individuals with rights over their health information
and establishes limits on who is permitted to view and receive such information. It contains provisions
relating to patients’ privacy including an individual’s right to view and receive copy of medical records,
as well as have errors corrected. However, medical information may be used and shared for certain
purposes and may be shared without patients’ consent for purpose of treating the patient, coordinating
patient care with providers, arranging for payments to providers, and protecting public health. Medical
information can also be reported to the police and other authorities under certain circumstances
INSTRUCTOR NOTES
A resulting answer or explanation is provided below for each Learning Outcome in Chapter 37. Every
outcome is also mapped to corresponding text page numbers, PPT slides, and relevant chapter
assessment exercises and activities for ease of reference and use.
LO1. Identify some of the major legal areas that impact health care.
Health care law is the federal, state, and local statutes, rules, regulations, and judicial decisions that
govern the legal relationships of patients, physicians and other medical professionals, and health care
insurers to one other. Administrative law, contract law, and medical malpractice all impact health care
law.
Text Pages: 618
PowerPoint: Slides 2 – 3
LO2. Explain the purpose of an advance directive and discuss the two most common types.
Many are opposed to their and their loved ones’ lives being prolonged by artificial life support when
there is little chance of recovery. Advance directives documenting the express wishes of individuals
regarding their health care if they become incapacitated or permanently unconscious without hope of
recovery. A living will is a document in which a person directs his or her physician and/or health proxy
to forgo certain extraordinary medical procedures if the person is dying or permanently unconscious. A
durable power of attorney for health care is a document that appoints an individual as an agent with
authority to make health care decisions on behalf of the principal in the event that the principal
becomes incompetent.
Text Pages: 618-620
PowerPoint: Slides 4-9
Discussion Questions: 26, 27
Thinking Critically About The Law 32, 36
Case Questions: 37
Case Analysis: 40
LO3. Describe the different types of medical insurance that are commonly available to individuals
and employers.
Community-Based Insurance is medical insurance programs provided by Blue Cross and Blue
Shield. Major Medical is a form of health insurance that covers serious illnesses and lengthy
hospitalizations. Individuals and employers purchase Commercial Insurance policies from private,
often for profit, companies. Self-Insurance is medical insurance coverage is provided by an employer.
Health Maintenance Organizations are organizations providing health insurance by coordinating
services with specific doctors, hospitals, and other health care providers. Medicare is a federal program
that pays for specified health care expenses for individuals 65 or older and to persons with disabilities
and certain other individuals. Medicaid is a federal health care program for certain individuals and
families with low incomes.
Text Pages: 620-623
PowerPoint: Slides 10-12
Discussion Questions: 28
Case Questions: 39
Case Analysis: 40, 41
LO4. Describe six types of health-related insurance benefits typically available to employees.
Medical Insurance includes community-based, major medical, commercial insurance, self-insurance,
and HMO. Family Plans are where employer elect to procure a family medical plan providing
coverage to the employee, the employee’s spouse, children, and other dependents. Disability
Insurance provides supplementary income for lost wages due to illness or accident preventing
employee from working. Dental Insurance usually covers procedures such as cleanings, fillings, root
canals, etc. It usually covers up to a specified dollar limit.Vision Insurance usually covers eye exams,
corrective lenses, and contact lenses. Group Life Insurance covers employees’ beneficiaries if there is
loss of the employee’s life.
Text Pages: 623-625
PowerPoint: Slides 19-25
Discussion Questions 29
Case Questions: 38
Legal Research: 44
LO5. Explain the major provisions of the Patient Protection and Affordable Care Act of 2010.
Mandates that all individuals have minimal essential health insurance coverage, unless have employer
or government plan. Individuals not complying must pay a penalty, although financial hardships or
inconsistent religious convictions are exempt from compliance. State health insurance exchanges are
required where businesses purchase policies, compare premiums and features. The same premiums are
paid by individuals of the same age and location, there are no exclusions for pre-existing conditions,
nor are there annual or lifetime benefit caps. Any group health insurance plans must provide coverage
for dependents until age 26.
Text Pages: 625-626
PowerPoint: Slide 26
Legal Research: 43
LO6. Explain the major provisions of the privacy rule in the Health Insurance Portability and
Accountability Act of 1996.
This federal statute provides individuals with rights over their health information and establishes limits
on who is permitted to view and receive such information. It contains provisions relating to patients’
privacy including an individual’s right to view and receive copy of medical records, as well as have
errors corrected. However, medical information may be used and shared for certain purposes and may
be shared without patients’ consent for purpose of treating the patient, coordinating patient care with
providers, arranging for payments to providers, and protecting public health. Medical information can
also be reported to the police and other authorities under certain circumstances
Text Pages: 626-627
PowerPoint: Slides 27
Discussion Questions 31