Introduction

Even minor illnesses and injuries can cost thousands of dollars to diagnose and treat. Serious illnesses can be financially devastating. Having adequate health care coverage not only helps ensure that you’ll get the care you need, but also helps protect you and your family from large financial losses in the event of an illness or injury.

Understanding how health coverage works is an important first step in finding a health plan that meets your needs. This publication provides general information about the kinds of health care coverage available in Texas. It can help you evaluate different health plans and know what to do if you have a problem with your coverage.

Health Plan Basics

Health care plans pay for most, and sometimes all, of the treatment costs for illnesses and injuries. They can generally be classified as either “fee for service” or “managed care.” Many people obtain health coverage as part of a group – such as an employer, professional association, or other organization – that offers health coverage to its employees or members. Others may buy individual health coverage directly from an agent or insurer. The type of plan you have and how you obtained it usually determines the benefits included, how you access and receive medical care, and what you’ll have to pay out of pocket.   

Fee for service vs. managed care

Fee-for-service plans, often called “indemnity plans,” are sold by traditional insurance companies. With a fee-for-service plan, you can go to any doctor or provider you want, and you don’t need a referral to see specialists. A fee-for-service plan will generally pay for most, but not all, of the costs to treat medical conditions covered by the policy.

Often your provider will bill your insurance company directly for its share of your health care costs. In some cases, however, you may have to pay the bill up front and then file a claim with your insurance company for reimbursement. Texas law requires companies to pay claims promptly, but it could take several weeks for you to receive your reimbursement.

With a fee-for-service plan, you will pay:

• Premiums. A premium is a fee to participate in the plan. You’ll have to pay premiums for as long as you have coverage. If you have a plan through your work, your premium will likely be deducted from your paycheck. Employers who offer health plans usually contribute toward some or all of your premium costs, but they aren’t required to do so.
• Deductibles. A deductible is an amount that you must pay out of your own pocket before your plan will begin to pay. If you have a family plan, the deductible may apply to your entire family, or each individual may have a separate deductible. You’ll usually have to meet your deductible each year. Many insurance companies offer high-deductible options for plans. In general, the higher your deductible, the lower your premium will be.
• Coinsurance. Once you’ve met your deductible, most fee-for-service plans will pay a percentage of the remaining cost for covered health services and require you to pay the rest. This cost-sharing is called coinsurance. The coinsurance will vary by plan. For instance, some plans may pay 80 percent of the cost, leaving you to pay 20 percent, while others may pay 70 percent, leaving you to pay 30 percent. In Texas, health plans must pay at least 50 percent of the cost of covered services after the deductible has been met. As with deductibles, the higher the amount you pay in coinsurance, the lower your premium will be.

Note: Most fee-for-service plans will pay only up to a maximum amount, such as $1 million, during your lifetime toward your total medical expenses or for certain medical conditions. This is called a “lifetime maximum.”

Managed care plans use “networks” of doctors, hospitals, clinics, and other health care providers that have contracted with the plan to provide health services to the plan’s members. Some managed care plans require you to use providers within the plan’s network for all routine care. Others pay for care from any provider, but offer financial incentives for you to use providers within the network.

In general, managed care plans are more affordable than fee-for-service plans that offer comparable levels of coverage. Managed care networks provide a built-in clientele for network providers, allowing them to charge lower rates. In addition, managed care plans control costs by emphasizing preventive care in an attempt to avoid serious medical conditions that would later require more expensive treatment.

Managed care plans will only pay for services deemed to be “medically necessary.”  If the plan covers prescription drugs, it may have a list, called a “formulary,” which specifies the drugs it will cover.

In general, the trade-off for managed care is reduced choice for increased affordability.

There are three types of managed care plans, each with a different level of provider choice:

1. Health maintenance organizations (HMOs) generally require you to receive health care only from providers within the HMO’s network. There are exceptions for medical emergencies and when medically necessary services are not available within the network. With an HMO, you’ll choose a “primary care physician” from a list of doctors in the HMO’s network. Your primary care physician oversees all of your medical care and provides referrals to specialists and other providers.

   HMOs usually pay primary care physicians a set monthly fee – called a capitation fee – for each member, regardless of the amount of covered services performed.

2. HMOs with a point-of-service (POS) option allow members to use providers outside the HMO’s network without first having to receive a referral. However, if you use providers outside the network, you’ll have to pay more for your health care. A POS plan may exclude the option for out-of-network care for certain medical conditions. POS coverage is usually offered as a “rider,” or an add-on to the contract, for an additional fee.
3. Preferred provider organization (PPO) plans allow you to go to any provider you choose. However, you’ll pay less if you use providers in the PPO’s network. You don’t have to select a primary care physician to oversee your care in a PPO plan.

With a managed care plan you will pay

• Premiums.
• Deductibles.
• Copayments. Copayments are amounts you pay each time you go to the doctor, fill a prescription, or receive a covered health service. Most managed care plans usually have a maximum out-of-pocket expense that you’ll have to pay in copays and deductibles over a certain period, usually a year. When you reach this amount, your plan will pay 100 percent of all further costs.
• Coinsurance. This is the percentage of the cost for health care services that you must pay after you’ve met your deductible. Coinsurance usually only applies to out-of-network care in PPO and POS plans.

Plan comparisons

Your rights in an HMO

Texas has some of the most comprehensive patient protection laws in the nation.

All HMOs must have an internal appeals procedure to allow members to contest a decision to deny medically necessary treatment, including denials of medications that are not on the HMO’s formulary. After you exhaust your appeal rights within the HMO, you can request an Independent Review Organization (IRO) to review the denial. The IRO may agree with the HMO’s decision or reverse the HMO’s decision. The HMO must pay for the review, and the IRO’s decision is binding on the HMO. An IRO review is only available if the HMO decides that the covered service or treatment is not medically necessary. For example, the IRO review is not available if the decision to deny coverage is due to an exclusion in your contract. In addition, not all health plans are subject to the IRO review process. Contact your plan to determine whether an IRO review is available to you when services or treatments are denied.

The HMO must have a procedure to resolve complaints from members and a procedure for the member to appeal the decision if not satisfied with the resolution of the complaint. HMOs may not cancel or retaliate against a group contract holder (employer), a doctor, or a patient who files a complaint against an HMO or appeals an HMO’s decisions.

HMOs may not prohibit doctors from talking to you about your medical condition, treatment options, and terms and requirements of your health care plan, including how to appeal an HMO’s decision. An HMO also may not provide financial rewards to doctors for withholding necessary care.

Texas law provides the following additional protections by requiring that HMOs

• have adequate personnel and facilities
• make covered health care services available within a certain mileage from your home, residence, or workplace
• allow referrals to out-of-network providers when medically necessary covered services aren’t available within the network
• allow members with chronic, disabling, or life-threatening illnesses to use specialists as their primary care physicians under certain circumstances
• allow members to continue seeing providers no longer with the network for specified periods of time if there are special circumstances, such as a terminal illness, disability, life-threatening condition, or pregnancy, as long as the provider agrees to continue treatment at the HMO’s contracted rate
• pay for care in an emergency facility to evaluate and stabilize medical conditions of recent onset and severity that would lead a prudent layperson with an “average knowledge of medicine and health” to believe that failure to get immediate medical care could place your health in serious jeopardy, or which could seriously jeopardize the health of the fetus if you’re pregnant. If emergency treatment is provided by a facility outside the HMO’s network, the member may be transferred to a network facility and physician once the patient’s condition is stabilized.

Group vs. Individual Coverage

Group health plans

Group plans are commonly offered by employers as part of an employee benefits package. They can also be obtained through some trade unions, professional associations, churches, and other organizations. Most Texans with health coverage are in employer-sponsored group plans, through either their own employer or their spouse’s employer. The state and federal laws for group plans are somewhat different depending on the size and nature of the group. Texas law contains special provisions for plans offered by small businesses. For instance, some state-mandated benefits that must be included in plans offered by large employers do not have to be included in small-employer plans.

Employers and groups aren’t required to offer health coverage to their employees and members. Those that do are not required to contribute toward plan premiums. Some carriers, however, may require employers to pay 50 percent or more of an employee’s premiums.

Following is a brief description of the most common types of group health plans:

• Small-employer plans are plans sponsored by businesses with between two and 50 eligible employees. Eligible employees must be full-time employees who usually work at least 30 hours a week. In addition, they may not have health coverage through some other source and must not be seasonal, part-time, or substitute workers. If a small employer offers a plan, it must be made available to all eligible employees equally.
  
  State law sets a 15 percent cap on annual rate increases due to members’ health status for small employer health plans. Also, any carriers who discontinue a small employer plan must automatically accept the group into any other employer plan that they offer, regardless of any enrollment requirements.
• Large-employer or other group plans are offered by businesses that don’t meet the small employer requirements and don’t self-fund, and by other groups, such as a churches, trade unions, and professional associations. If a large employer offers an HMO plan only, the law requires the HMO to offer a point-of-service option.
  
  Large employers may offer coverage to a specific class of employees only – such as executives – and not offer coverage to others. Coverage within a class, however, must be offered to all employees equally, and the employer cannot use the health status of employees as a reason not to offer coverage to a particular group. Employers may never exclude an employee from plan membership for any health-related reason.
• “Self-funded” plans are governed by the federal Employee Retirement Income Security Act (ERISA). They are often called ERISA plans. Employers who self-fund their health plans pay the costs of their employee’s health care themselves, rather than an HMO or insurance company. The law allows self-funded plans to operate in multiple states without having to meet each state’s insurance laws. Self-funded plans are regulated by the U.S. Department of Labor. TDI has very limited authority over self-funded plans.
  
  Most of the health plans offered by very large employers are self-funded. There are only a few federal requirements for self-funded plans, and the benefits included may vary by plan and employer. However, they generally provide comprehensive coverage and may provide more extensive coverage than other plans.
  
  Self-funded plans have their own procedures for complaints and dispute resolution, so it’s important to read your benefits handbook carefully. Unresolved questions and complaints should be directed to the Department of Labor’s Employee Benefits Security Administration (EBSA). For more information, call EBSA

  214-767-6831

  On occasion, self-funded groups will subcontract certain aspects of the plan to an insurance company or HMO. In this case, the subcontractor is known as a Third-Party Administrator (TPA). TPAs must have a Texas license to do business in the state. TDI has jurisdiction only over complaints against a TPA, not against a self-funded plan’s direct sponsor.
• Multiple Employer Welfare Arrangements (MEWAs) are employer-sponsored plans offered by a group of businesses that have joined together to offer a plan. MEWAs can cut plan costs by spreading risk across a larger pool and reducing administrative overhead. MEWAs can be self-funded, and regulated by the Labor Department, or administered by a Texas-licensed insurer or HMO, and regulated by TDI. Except for the fact that their membership extends across businesses, MEWAs behave like any other self-funded or large employer plan.
  
  If the MEWA retains all or part of the plan’s insurance risk, it must be licensed by TDI. TDI’s regulation of licensed MEWAs focuses primarily on solvency issues. However, MEWAs are required to offer certain mandated benefits. MEWAs do not have to be licensed if an authorized insurance company has assumed 100 percent of the MEWA’s liability.

Your rights in a group plan

Once an employer health plan is issued, a carrier generally may not use the health-related factors of any insureds as a basis for canceling or refusing to renew the plan. The health factors may still be used to determine the plan’s premium rates, however.

A carrier may not “cherry pick” individuals within a group to offer or deny coverage to, nor may a carrier charge different individuals within the group different rates. When deciding whether to cover a group, the carrier must accept or reject the group as a whole.

Large employers establish the criteria to determine employees who are eligible for enrollment. Such criteria may not be based on health factors. A large employer carrier must accept or reject the entire group of individuals who meet the participation criteria established by the employer and who choose coverage.

Carriers must allow new employees to have at least 31 days from their start date to decide to enroll in a plan. Carriers must also offer a 31-day “open enrollment period” each year, during which any existing employees who are not yet covered may join. There are special enrollment periods for certain employees and dependents. For example, a dependent for whom an employee must provide medical child support under a court order may be enrolled before the next annual enrollment period.

Carriers must provide the employer with at least 60 days advance notice before premium increases take effect, and 90 days notice before discontinuing a plan. If a plan is discontinued, the carrier must offer each employer the option to purchase other employer-sponsored health coverage offered by the carrier at the time of discontinuance.

Individual Health Plans

Insurance companies and HMOs sometimes sell coverage directly to individuals. These policies can cover the purchasing individual only or include a spouse and dependents. Individual plans can be a good option if you’re self-employed or work for a company that doesn’t offer a health plan.

In general, individual plans cost more, and may cover fewer conditions, than employer-sponsored plans or other group plans. Group plans achieve lower rates by spreading the risk of claims over a greater number of people.

The following are common types of coverage you can usually buy as an individual:

• HMO plans – Managed care plans offered by HMOs that pay for covered health services as long as you use your particular HMO’s network of providers or receive preauthorization for obtaining care outside the network.
• Major medical policies – Policies that cover hospital stays and physician services in and out of the hospital. Major medical policies also may be offered as PPO plans.
• Hospital surgical policies – Policies that cover only expenses directly related to hospital and surgical services, such as daily room, surgery, and doctor charges.
• Hospital indemnity policies – Policies that pay up to a fixed amount for each day you are in the hospital.
• Specified or dread disease policies – Policies that only cover specific illnesses detailed in the policy, such as cancer or AIDS. This coverage also may be offered as a rider to extend the other types of individual coverage.
• Short term policies – Policies that only last for a specified length of time, not to exceed 12 months. Short-term policies are most often purchased as a “fill-the-gap” measure by people who lose coverage for some reason but expect to gain it back.

Carriers have the right to evaluate your medical history and other health factors when deciding to offer individual plans. The carrier may deny your application based on health factors or only offer a plan with an “exclusionary rider” eliminating benefits for certain conditions.

Note: As a rule, it’s better to buy one comprehensive HMO or major medical policy. If you need more coverage, these plans often allow you to add benefits. The other types of individual plans may cost less, but they usually provide fewer benefits or may duplicate coverage you already have.

Covering dependents

If a plan covers dependents, such as children and grandchildren, they are eligible for dependent health care coverage until the age of 25. State law requires plans to provide comparable coverage for a dependent if the enrolled parent is required to provide medical child support under a court order. The plan may not require the child to live within the service are or to live with the parent.

Children with mental or physical disabilities who cannot financially support themselves may be covered indefinitely. The plan may require evidence of disability.

Policies that include maternity coverage, and those that allow dependent coverage, must also provide automatic coverage for any newborn child for the first 31 days. You must notify your carrier if you wish to continue coverage for the child beyond this period.

Large-employer plans also must provide coverage for certain dependent students over the age of 25. However, except for emergency care and authorized referrals, an HMO plan can require dependent students to return to the plan’s service area to receive health care services.

If two spouses are covered by separate health plans, and both plans cover their dependents, the “birthday rule” takes effect. This means the plan of the parent who has the earlier birthday in the calendar year pays first. For example, the plan of a parent whose birthday is July 3 would pay for a child’s health care before the plan of the other parent born on July 4. However, if the first parent’s plan reaches its benefits maximum, the second plan can take effect. In the event of a divorce, a court usually determines which parent’s plan is a dependent’s primary coverage.

Health Plan Benefits

Benefits vary from one plan to another. Health plans are classified as either “state-mandated plans” or “consumer choice plans.” A state-mandated plan provides certain required minimum features and coverages. To make health coverage more affordable, Texas law allows carriers to also offer consumer choice plans that do not include all of the state-mandated benefits. Consumer choice plans are required to provide members with a disclosure statement and a list describing the benefits that are not covered. To be certain of the coverages you have with any plan, you should refer to your policy or explanation of coverage.

Although consumer choice plans also may be called “standard plans,” be careful not to interpret the term to mean that the coverages provided are “standardized.”  Each carrier’s consumer choice plan may be different – and, in fact, a carrier may offer several different consumer choice plans.

The following charts show the minimum required benefits for consumer choice and state-mandated health plans. The requirements are different according to whether the plan is an individual, small-employer, or large-employer plan, and whether it is administered by an insurer or an HMO.

Notes: “SMP” denotes a state-mandated plan; “CCP” denotes a consumer choice plan. Benefits labeled “Yes” must be included as part of the plan; benefits labeled “No” are not required; benefits labeled “Offer” must be offered, but you may decline any or all of them if you wish.

Federally mandated benefits

In addition, the following benefits are required by federal law:

• Maternity and newborn coverage
  
  If maternity benefits are covered, a group health plan with more than 15 employees must provide for a minimum hospital stay of 48 hours after an uncomplicated vaginal delivery, and a minimum stay of 96 hours after an uncomplicated cesarean birth.
  
  A carrier may not deny benefits on the grounds that a pregnancy is a “pre-existing condition.”
  
  Plans that have maternity benefits must automatically extend coverage to the newborn for 31 days. To continue coverage beyond 31 days, you must notify your plan administrator during this period and pay any additional required premiums.
  
  A carrier may not exclude or limit initial coverage of a newborn child because of premature birth, accident, illness, or congenital medical conditions. This includes providing reconstructive surgery for craniofacial abnormalities for a child younger than 18 who has been continually covered by a health plan.
  
  A benefit covering “complications of pregnancy” may help if your plan does not include a maternity benefit. Miscarriages or non-elective cesarean births are considered complications. In most cases, management of a difficult birth is not considered a complication, and is only covered by plans with maternity benefits.
• Mastectomy benefits
  
  Plans that offer mastectomy coverage must also provide for reconstructive surgery of the breast on which the operation was performed, as well as the other breast if needed for a symmetrical appearance. This coverage may be subject to deductibles, copayments, and coinsurance that are consistent with other benefits under the plan. The benefit must also cover prosthesis and treatment of complications at all stages of mastectomy, including lymphedemas.

Limitations of Coverage

Utilization review

Carriers may deny payment for any treatment, or the continuation of any treatment, if they deem that it is not “medically necessary.” Many health plans perform “utilization review” before non-emergency medical procedures are approved. The review must be conducted by an appropriate physician, dentist, or other health care provider, and any decision denying treatment must include a medical reason. State law requires the criteria used to approve or deny requested services or treatments to be objective, medically (clinically) valid, compatible with established health care principles, and flexible enough to allow deviation from standard guidelines when justified on a case-by-case basis.

If you have an unresolved complaint about a utilization review for an individual, small-employer, or large-employer plan, you may file a complaint with TDI. If you have a complaint about a self-funded plan, contact the U.S. Department of Labor.

To reduce the chance of a claims problem, read your policy or benefits booklet carefully. Be sure you meet all of the plan’s requirements, and keep copies of all correspondence with your carrier and health care provider.

Approval of treatment is not the same as approval for payment. You may still need to file a claim after the procedure. Carriers can refuse payment for portions of approved treatment if they are found to be “unnecessary expenses.”

Pre-existing conditions and waiting periods

If you currently have a medical problem, or have had one in the recent past, it may meet a plan’s definition of a “pre-existing condition.” Most plans will require you to wait a period of months, or sometimes years, before paying benefits for treatment related to this condition.

You must disclose any pre-existing conditions in your application for any health plan. Failure to do so could jeopardize future claims or invalidate the policy.

Carriers may define a pre-existing condition as any condition for which you’ve received medical advice, care, diagnosis, or treatment during a specified period of time before the plan takes effect. In addition, individual plans can define a pre-existing condition as one where you’ve shown the existence of symptoms likely to cause you to seek diagnosis or care during the period before the plan begins. Typically, individual plans consider your medical history for the previous five years to determine whether you have a pre-existing condition. Employer-sponsored plans typically consider the previous six months, while other group plans usually look at the previous 12 months.

An individual carrier may decline to cover you entirely on the grounds of a pre-existing condition, or the carrier may insist on a special policy “rider” that excludes treatment for the condition. Group carriers may not insist on a pre-existing condition exclusion rider.

The maximum pre-existing waiting period for an individual health plan is two years. The maximum wait for employer-sponsored health plans is one year. You may have to wait up to two years for pre-existing conditions to be covered if you have coverage through a group plan that’s not sponsored by an employer.

Some plans may require a standard waiting period before new members are eligible to receive any benefits, regardless of whether they have a pre-existing condition or not. If this is the case, your pre-existing condition wait begins with the start of the waiting period. For example, if your plan has a waiting period of three months and a pre-existing condition waiting period of one year, a new member would be eligible to receive benefits for a pre-existing condition nine months after the waiting period ends.

HMOs have an “affiliation period” that works in much the same way as a waiting period for pre-existing conditions in indemnity plans. However, the affiliation period may not be longer than 90 days.

Reducing or eliminating pre-existing condition waits

If you’re switching from one health plan to another, or have recently had health coverage, you may have a shorter waiting period before your pre-existing conditions are covered.

The amount of time you spent covered under the previous health plan is “creditable” toward any new plan’s waiting period, as long as there is no gap in coverage greater than 63 days. For example, if you’ve been covered by a health plan for the past six months, and then switch to a new plan with a pre-existing condition waiting period of one year, you get “credit” for your previous coverage and you only have to wait six months. If you had coverage under the previous plan for a year, you wouldn’t have a waiting period with the new plan.

The following table summarizes how health plans handle pre-existing conditions:

Long-term care

“Long-term care” refers to the type of personal care services you may need if you become unable to care for yourself because of a loss of functional capacity or cognitive impairment.

Long-term care is different from traditional medical care. Traditional medical care treats physical problems directly in an attempt to permanently cure or control them. Long-term care services, however, help a person maintain his or her ability to function, perform normal daily activities, or maintain a normal lifestyle.

In general, health plans do not cover long-term care. Some may cover short-term nursing home care, but long-term custodial care in a nursing home or at-home custodial care typically requires a special long-term care policy.

Shopping for Coverage

Be sure you understand the full extent of the coverage that is included in any health plan you’re considering.

If you have more than one option, choose the plan with the highest level of coverage you can afford. The higher a plan’s deductibles, copays, and coinsurance, the more you can usually save on premiums. However, you’ll also have to pay more out of pocket for claims.

Consider factors other than cost. A carrier’s financial rating and history of consumer complaints are other important considerations. Also make sure your carrier is licensed by TDI. Guaranty associations play the claims of licensed carriers that become insolvent. If your company isn’t licensed, your claims could go unpaid. You can learn a company’s financial rating from an independent rating organization, its complaints history, and its license status by calling TDI’s Consumer Help Line or by viewing company profiles on our website

1-800-252-3439
463-6515 in Austin
www.tdi.state.tx.us

Ask your friends, family, and physician for recommendations. Be sure you learn the answers to these questions about any health plan you’re considering:

• Does the plan cover your choice of physicians and hospitals?
• Are there limits on medicines, referrals to specialists, or the types of treatment or surgery available?
• Are there benefit limits per person, family, illness, treatment and/or hospital stay?
• What is the procedure for out-of-network emergency care?
• Does the plan have yearly or lifetime maximums?

Additional precautions

When you apply for coverage, be sure you fill out the application accurately and completely. If you knowingly provide incorrect, incomplete, or misleading information, especially about a pre-existing condition, your coverage could be canceled or your benefits denied.

When purchasing an individual plan, never sign a blank policy application, and verify any information filled in by an agent. Make payments by check or money order payable directly to the insurance company or HMO, not the agent, and insist on a signed receipt on the carrier’s letterhead. Make sure you have the full name, address, and phone number for both your agent and your carrier.

Never pay more than two month’s premiums until you have received a copy of your policy, HMO certificate, or group membership certificate.

State law requires that you have a 10-day “free-look” to evaluate any individual coverage policy, during which you can change your mind and receive a refund. If you return a policy, send it by certified mail, return receipt requested.

Health Plan Rates

Texas, like most states, has no authority to regulate or approve health plan rates. The only exception is for small-employer plans, where the state has a cap on annual premium rate increases. Insurance companies and HMOs set their own premiums. Small-employer and large-employer plans are required to give 60 days notice before any increase takes effect.

In general, health plan rates are determined by

• The coverages included. The more conditions your plan covers, the greater the carrier’s risk. Premium rates increase accordingly.
• Amount of the deductibles. Plans with higher deductibles have lower premiums.
• Number of covered dependents. Adding a spouse or dependent children to your plan will raise your premiums.
• Number of group plan participants. Group plans are usually less expensive than individual plans. As group size increases, administrative costs per plan member decline. Also, smaller groups and individuals tend to buy health coverage based on participants’ targeted needs, increasing the likelihood of claims. This type of “custom tailoring” is less likely as claims risk is distributed across a larger population.
• Claims experience. You can expect to pay more if you’ve filed claims in the past.
• Age. Older people can reasonably be expected to require more, and more expensive, health care. Your premium will reflect your age, or the ages of the members in your group plan.
• Gender. Females generally incur higher medical costs than males at younger ages, particularly during childbearing years. This variance diminishes with age until medical costs for males begin to exceed those for females in the late 50s and early 60s. Younger, proportionately more female plan members, or older, proportionately more male, will increase rates.
• Geography. Health costs vary by region due to differences in cost of living, medical practices, and the amount of medical competition in the area.
• Industry. If you are in an employer-sponsored plan, your rates may be affected by the nature of your profession. Some industries have higher medical claims costs than others because of working conditions and the prevalence of accidents. High employee turnover in some industries can also result in higher administrative costs for the carrier.

Handling rate increases

Premiums tend to rise quicker for individual plans since there is no employer or other plan sponsor to help bear the cost. If your premiums are increasing beyond your ability to pay, you may be able to save money by asking your carrier to revise an individual plan.

Options to reduce your individual plan’s premiums may include raising your deductibles or copays, increasing your maximum out-of-pocket payment, or changing your coverage.

Be sure that you don’t drop an essential coverage, however. Before making any changes to your plan, find out if your carrier will allow you to add back any dropped benefits later.

If you’re unable to reach a good deal on your current plan, you may want to switch to a new plan or carrier entirely. Remember, if you have, or recently had, a medical condition, you may encounter problems finding new coverage. If you have a serious health condition and cannot find coverage, you may have to join the Texas Health Insurance Risk Pool or seek coverage through government programs.

Important!  Always try to keep your current coverage until new coverage takes effect. Most companies do not begin coverage until they approve your application and deliver your policy. Gaps in coverage leave you vulnerable in the case of emergency sickness or injury and can result in longer waiting periods before pre-existing conditions are covered by a new plan.

If you are concerned about the size of certain physician fees and hospital charges check with your plan to see if the provider’s estimate of how much the treatment will cost is within the “usual and customary” range, keep a record of whom you talk to and when, and get a second opinion if surgery is involved.

Also, don’t be afraid to challenge a physician or provider about the costs of tests or services:

• Request an itemized bill and review it. Question billings you do not understand. If the explanation doesn’t make sense, check with your plan.
• Check whether your physician or provider included the proper treatment or procedure code. An improper code may result in the wrong amount being listed.
• Tell your insurance company or health benefit plan administrator if you think certain charges are incorrect or you were charged for a service never received.

Check your county medical association. Grievance committees at the county level accept complaints against physicians or providers and work as go-betweens in fee disputes.

Losing Coverage

If your coverage is through a licensed insurance company, and the company becomes insolvent, valid claims are covered by a state guaranty association up to a certain amount. The guaranty association does not cover claims against HMOs, MEWAs, valid self-funded ERISA health benefit plans, and fraternal benefit societies.

HMOs must keep cash and securities on deposit with the state to pay claims if they become insolvent. In the event an HMO becomes unable to pay its claims, state law authorizes the Commissioner of Insurance to assign the HMO’s members to another licensed HMO in the area.

Individual health carrier plans that cover hospital, medical, and surgical expenses are “guaranteed renewable.”  This means your carrier cannot arbitrarily deny renewal of your policy, including on the grounds of health-related factors. However, a carrier can legally cancel your coverage for various reasons, including but not limited to

• failure to pay premiums
• intentionally misrepresenting personal information in your policy application
• filing a false claim or otherwise committing fraud against the carrier.

A carrier may discontinue a particular plan as long as it drops the plan for all policyholders. However, in this case the carrier must offer the policyholders who lose coverage the right to purchase any other plan the carrier offers. If a carrier withdraws from the Texas market entirely, it may not re-enter the market for five years.

Late payment of premiums on an individual policy could cause you to lose your coverage and benefits. Some carriers may accept late payments. However, many carriers will require that you reapply for the coverage before you can be reinstated. If you must reapply, the carrier may again consider your health history before deciding to accept you.

Reinstated coverage will only cover health expenses due to an accident if the accident occurs after reinstatement. It will only cover expenses due to illness if the illness begins more than 10 days after reinstatement. When a carrier reinstates a policy, it may also attach riders excluding certain coverage. The exclusions may be permanent or for a specified period of time.

Under an individual policy, death of an insured spouse does not necessarily terminate coverage. The surviving spouse becomes the insured. If you lose coverage due to a change in marital status, you are entitled to your own individual policy. You don’t have to prove you’re in good health to receive the new policy.

If you have a group health plan, you can lose your coverage for various reasons, including but not limited to

• losing your job
• reduction to part-time status
• terminating your membership in the association or group sponsoring the plan.

Continuation of group coverage is required for certain dependents for up to three years if termination of coverage is due to death, retirement, or divorce. To qualify, a dependent must have been covered by the group policy for one year or be an infant less than 1 year old. Dependent benefits are the same as those provided by the group health plan. Continuation of coverage will end early if dependents obtain new coverage, premiums are not paid or the group policy is terminated.

COBRA protection

If you lose your group coverage for employment-related reasons, you may be able to keep your coverage for a limited time, although your employer will no longer continue any contribution toward your premium.

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that gives employees, and in some cases retired employees, the right to continue group health coverage for a specified period. You may extend coverage for yourself for up to18 months, and for your spouse or any dependent children for up to 36 months. COBRA generally only applies to employees who lose their coverage because of reduced work hours or lose their job for reasons other than “gross misconduct.”

COBRA applies to all employer health benefit plans with 20 or more employees, except plans sponsored by the federal government and certain church-related organizations.

COBRA also enables a spouse and dependent children to continue coverage when an employee is entitled to Medicare, divorces, or dies. An employee’s children qualify for continued coverage under COBRA if they lose “dependent child” status under the rules of the health benefit plan. An employee, spouse, or dependent child has 60 days after qualifying for COBRA coverage to decide whether to take it. If accepted, the cost to the employee, spouse, or dependent child is the full premium, plus a 2 percent administrative fee. Depending on the situation, coverage may continue for 18 to 36 months, but may be slightly longer in some situations.

If you elect continuation of HMO coverage through COBRA and move out of the service area, you will be covered only for emergency services. For more information, call the Dallas office of the U.S. Department of Labor’s Employee Benefits Security Administration

If you meet certain criteria, Texas law requires your group plan to allow you to continue coverage for six months. The six-month “continuation period” begins after any federal COBRA extension period ends, or begins immediately if COBRA coverage does not apply. Therefore, if you are eligible and opt for COBRA coverage, you may have a total of 24 months to find new health care coverage.

Before the Texas continuation period ends, your group plan is also required to provide you with information on how to enroll in the Texas Health Insurance Risk Pool.

State continuation of group coverage

Health carriers are required to provide a group continuation privilege for certain members whose coverage under the group contract has been terminated for any reason except involuntary termination for cause. To be eligible, the member must have been continuously covered under the group contract and under any group contract providing similar services and benefits which it replaces for at least three consecutive months immediately prior to termination. State continuation of group coverage may not terminate until the earliest of the six months after the date the election is made, the date on which the failure to make timely premium payments would terminate coverage, the date the covered person is covered by another similar health care coverage, or the date the group coverage terminates in its entirety.

Other Coverage Options

If you don’t work for an employer that offers a health plan and cannot afford or qualify for an individual plan, there are some other options. However, this coverage generally is either very limited, very expensive, or both. Before considering these options, there are a few things you should do:

Filing Claims

State law requires insurance companies and HMOs (in the case of claims filed for out-of-area or emergency care) to pay claims promptly and fairly and subjects them to penalties if they don’t. The prompt-payment law does not apply to self-funded ERISA plans even though they may use an insurance company or HMO to administer the health plan.

If a carrier denies your claim for benefits for any reason, it must provide a written explanation. If you are not satisfied, ask to see the policy language backing up the denial. Should you find yourself in a claims dispute, it may help to provide the insurer with additional details about your treatment, your condition, and any special qualifications your provider might have. Ask the physician or provider to send a letter explaining anything unusual about the procedure or the amount charged.

Handling Complaints

To limit the chances of a claims dispute, study the provisions of your policy carefully. Be sure you understand any limitations or exclusions before seeking medical treatment. Be sure all benefits described to you by an agent or others are in the written policy. Your health plan covers only the medical care specifically described in the policy or HMO contract.

Remember, it’s unlikely your plan will reimburse 100 percent of your bill. You will usually have to pay deductibles, coinsurance, and copayments.

In addition, your carrier may have grounds for denying or limiting the size of your claim if a provider’s fees exceed “usual and customary” charges. Usual and customary charges may be based on fees charged by other physicians and providers in your area, typical fees compiled by an independent rating service, or typical fees compiled by the carrier.

Most insurance companies maintain a toll-free telephone information and complaint line, and some companies and HMOs provide special mediation or arbitration procedures for handling complaints. Here are a few suggestions for handling claim or reimbursement problems:

• For group coverage, contact your health plan’s benefits administrator, if one is available. If there is no benefits administrator or if you have an individual health care policy, you should contact the insurance company or HMO.
• Submit a written complaint to your health plan, insurance company, or HMO specifying your concerns.
• Ask for explanations in writing and keep good records, including the names of people you talk to while trying to resolve the matter.
• Ask your health benefit plan to verify that your share of the bill (coinsurance or HMO copayments) was based on the actual bill the insurance company paid after any negotiated discount arrangement. An insurance company or HMO that refuses to base your share of the bill on actual billings is engaging in a prohibited and unfair claim settlement practice.
• If you are unable to resolve the matter, file a formal complaint with TDI.

Filing a formal complaint with TDI

If you wish to file a complaint with TDI, please provide the following information:

• your name and address
• your policy number
• a concise but complete description of your complaint
• names of family members insured under your health care plan
• the name of your insurance company or HMO
• the name of your agent
• the date of your health care service
• copies (not originals) of any supporting documents, including letters, notes, invoices, canceled checks, or advertising material.

You may mail or fax your complaint or submit your complaint online on our website

Texas Department of Insurance
Consumer Protection Program (111-1A)
P.O. Box 149091
Austin, TX 78714-9091
512-475-1771 (fax)
www.tdi.state.tx.us

If your complaint is about an HMO, please send it to

Texas Department of Insurance
HMO Quality Assurance (103-6A)
P.O. Box 149091
Austin, TX 78714-9091
512-490-1012 (fax)
www.tdi.state.tx.us

For complaints against doctors, call the Texas State Board of Medical Examiners

1-800-201-9353

For complaints about hospital billings, call the Texas Hospital Association

1-800-252-9403.

For complaints against pharmacists, call the State Board of Pharmacy

512-305-8000

For More Information or Assistance

For answers to general insurance questions or for information about filing an insurance-related complaint, visit our website or call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday

www.tdi.state.tx.us
1-800-252-3439
463-6515 in Austin

For printed copies of consumer publications, call the 24-hour Publications Order Line

1-800-599-SHOP (7467)
305-7211 in Austin

Help us prevent insurance fraud. To report suspected fraud, call our toll-free Fraud Hot Line

1-888-327-8818

To report suspected arson or suspicious activity involving fires, call the State Fire Marshal’s 24-hour Arson Hot Line

1-877-4FIRE45 (434-7345)

The information in this publication is current as of the revision date. Changes in laws and agency administrative rules made after the revision date may affect the content. View current information on our website. TDI distributes this publication for educational purposes only. This publication is not an endorsement by TDI of any service, product, or company.