Page 511 - Business Principles and Management

Unit 5

provides additional coverage for more critical illnesses or treatments that are par-
ticularly extensive and expensive.
Disability insurance offers payments to employees who are not able to work
because of accidents or illnesses. Insurance companies typically do not pay dis-
ability claims unless the injured employee is unable to perform any work for the
company. Then it usually pays a portion of the salary the employee was earning
before the disability.
Because the health and wellness of employees are important to both the
business and the employee, both often share the cost of health insurance. Most
businesses offer a group insurance policy. Under this type of plan, all employees
can obtain insurance at a reasonable cost, regardless of their health, and the
cost is typically lower than if they purchased coverage individually.
Health insurance has become an important concern for American businesses,
individuals, and government. Because of the high costs of medical care, insur-
ance costs have increased to the point that many people and even companies
cannot afford them. Alternatives have been considered to control costs and pro-
vide basic coverage to as many people as possible.
One alternative to health insurance for employees is a health maintenance
organization (HMO). An HMO is a cooperative agreement between a business
and a group of physicians and other medical professionals to provide for the
health care needs of the business’s employees. The HMO receives a regular
payment for each employee that covers a complete set of medical services. To
receive coverage, employees must obtain treatment only from the health care
providers in the HMO. The goal of the HMO is to keep people healthy rather
than waiting until they become sick and then treating the illnesses. Health ser-
vices are planned and performed in a way that carefully controls health costs.
Some people prefer to receive health care services from a physician and hos-
pital they select rather than from the assigned health care practitioners in an
HMO. To fill this need, insurance companies offer another alternative: the pre-
ferred provider organization (PPO). A PPO is an agreement among insurers,
health care providers, and businesses that allows employees to choose from a list
of physicians and health care facilities. The insurance company negotiates with
a number of physicians and hospitals for a full range
of health care services. The contracts establish the
costs that the insurer will pay for those services to
control costs while still offering consumers a choice
of providers.
The alternative health plans being used by many
companies today, such as HMOs and PPOs, have
Floods are one of the major risks many businesses not resulted in the anticipated cost savings. In fact,
and homeowners fail to insure. Flood insurance is health care and health insurance costs are two of
usually not offered as part of home and business the most rapidly growing expenses of many busi-
policies but is sold through a cooperative agree- nesses today. Most are looking for alternatives, and
ment between the federal government and pri- many are shifting more and more of the cost to em-
vate insurance companies and agents. Point your ployees or are reducing benefits. The costs and
browser to www.thomsonedu.com/school/ methods of health insurance are one of the areas
bpmxtra. Play the flood-risk scenarios that of employee benefits that both businesses and the
demonstrate how flooding can affect people in federal government are studying closely.
various parts of the country. Decide which of the
scenarios could affect people in your community.
Prepare a short speech you would give to busi- LIFE INSURANCE
nesses and consumers to convince them of the Another common form of insurance on people is life
importance of buying flood insurance.
insurance. Life insurance pays money upon the death
of the insured to a person or persons identified in the
www.thomsonedu.com/school/bpmxtra
insurance policy, known as beneficiaries. With life

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