It looks like if I select the text itself and use Insert Paragraph, it deletes the text that I've highlighted.  Instead, I click on the line below it and use the Insert Paragraph which puts a split in the structure of the conent.  Then when I apply a heading to the text it works fine.  I suppose I will do that from now on.

 

However, I still have the question of why the heading can't be applied by simply surrounding the highlighted text with the <hX> tags.  I understand the issue of structure that comes with using headings, but that doesn't mean that it cannot be applied in that fashion.  If you just put the heading tags around some text, the structure will be applied automatically.