Getting sick can be expensive, especially if the illness is serious. Even minor illnesses and injuries can cost thousands of dollars to diagnose and treat. 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.
This publication provides information about health care coverage in Texas. You can also visit www.TexasHealthOptions.com to learn more about health coverage and the choices available to you. TexasHealthOptions.com is a complete online resource about health care and is a free service of the Texas Department of Insurance (TDI).
Note: President Obama signed the Patient Protection and Affordable Care Act - the federal health care reform law - on March 23, 2010. The act requires insurance carriers to provide significant additional coverages and strengthens consumer protections beginning with health insurance policies issued or renewed after September 23, 2010. For more information and regular updates, visit TDI's Federal Health Care Reform Resource Page at: www.tdi.texas.gov/consumer/cpmhealthcare.html.
Health Plan Basics
Health care plans pay for most, and sometimes all, of the treatment costs for illnesses and injuries. They are generally classified as either:
• indemnity • fee for service • managed care
Indemnity Plans
With an indemnity plan, you can go to any doctor or hospital you want, but you will have to pay for the entire cost of the service when you receive it. You must then seek reimbursement from your insurance company.
If the provider charges more than the amount stipulated in your insurance policy, you will be responsible for the excess charges.
For example, if your plan covers an office visit at $20 and your doctor charges $25, you will pay $25 out-of-pocket and then submit the receipt to your carrier. Once the claim is approved and processed, your carrier should pay you back $20 and the additional $5 will be remain an out-of-pocket expense.
Fee-for-Service Health Plans
With a fee-for-service plan, you can go to any doctor you want. The doctor will usually bill your insurance company directly for its share of the costs of your care. Your insurance company pays a percentage of the cost of covered health services, rather than a set dollar amount. For instance, your carrier may agree to pay 70 percent of the cost of a covered health care service, and you would pay the remaining 30 percent. The percentage the insurance company will pay varies by plan, but fee-for-service plans are required to pay at least 50 percent of the cost of covered services after any deductible has been met.
Managed Care Health Plans
Managed care plans provide health services to the plan members through contracted networks of doctors and hospitals. Some managed care plans require you to use doctors and hospitals within the plan's network for all routine care. Others pay for care from any provider, but offer financial incentives for you to use doctors and hospitals within the network.
In general, the trade-off with a managed care plan is that your choice of doctors and hospitals is limited in exchange for lower out-of-pocket costs. Managed care networks provide a built-in clientele for network doctors and hospitals, allowing the doctors and hospitals to charge lower rates. In addition, managed care plans control costs by focusing on preventive care in an attempt to avoid serious medical conditions that would later require more expensive treatment.
Managed care plans will only pay for covered services deemed to be medically necessary. If the plan covers prescription drugs, it may have a list - called a formulary - of drugs it will cover.
There are four types of managed care plans, each with a different level of provider choice:
• Health maintenance organizations (HMO) plans usually require you to use doctors and hospitals within the HMO's network. There are exceptions for medical emergencies, as well as for medically necessary services that can only be found outside your network.
Your primary care physician (PCP) will oversee your general medical care needs and provide referrals to specialists. HMOs may pay PCPs a set monthly fee for each member, no matter how many covered services they perform. • Preferred provider plan (PPP) plans are similar to HMOs but are more flexible. PPPs offer financial incentives for you to use doctors in their networks. Although you don't have to go to doctors and hospitals in the PPP's network, your costs will be lower if you do. PPPs don't require you to select a primary care physician, and you don't have to get a referral to see an out-of-network doctor or specialist. • Point-of-service (POS) plans are a combination of HMOs and PPPs. You will be required to choose a primary care physician, but you may visit out-of-network doctors without a referral. If you use doctors and hospitals 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 an add-on to the plan - called a rider - for an additional fee. • Exclusive provider organization plans (EPO) are offered by health insurance companies. They operate like HMOs. Except for emergency care, you must use doctors and hospitals in the plan's network.
Group vs. Individual Health Plans
Most 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 buy individual health coverage directly from an agent or insurance company. Individual plans usually cost more and may cover fewer conditions than plans offered through employers or other group plans. Group plans are typically less expensive because they spread the risk of claims over a larger number of people.
Individual Health Plans
Insurance companies and HMOs sometimes sell coverage directly to individuals. These policies can cover the individual only or can include a spouse and dependents.
Common Types of Individual Health Plans
• HMO plans pay for covered health services within the HMO's network of doctors and hospitals. You may need to receive pre-authorization (permission in advance) before obtaining care outside the network. • Major medical policies cover hospital stays and physician services, both, in and out of the hospital. They may also be offered as PPP plans. • Hospital surgical policies cover only expenses directly related to hospital and surgical services, such as daily room rates, surgery, and doctor charges. • Hospital indemnity policies pay up to a maximum limit for each day you are in the hospital. • Specified or dread disease policies only cover specific illnesses listed in the policy, such as cancer or HIV/AIDS. This coverage may also be offered as a rider to individual coverage. • Short-term policies are generally used to offer you medical and financial protection when you are between traditional health insurance plans. Short-term coverage is typically less expensive than traditional coverage and usually does not limit which doctors or hospitals you may visit.
Insurance companies will evaluate your medical history and other health factors when making a decision to offer individual plans. They may deny your application or only offer a plan with an exclusionary rider that limits your benefits by eliminating coverage for certain conditions.
Group Health Plans
Most Texans with health care coverage are members of an employer-sponsored plan. Employers commonly offer group plans as part of an employee benefits package. Some trade unions, professional associations, churches, and other organizations also offer them.
Employers and groups aren't required to offer health coverage to their employees and members. Those that do offer health coverage are not required to contribute toward plan premiums. Some insurance companies, however, may require participating employers to pay 50 percent or more of an employee's premiums.
Common Types of Group Plans
The state and federal laws for group plans are somewhat different depending on the size and nature of the group. Texas law requires large-employer plans to provide certain benefits that small-employer plans are not required to provide.
Following is a brief description of the most common types of group health plans:
• Small-employer plans are provided by businesses with two to 50 eligible employees. Eligible employees are full-time employees who usually work at least 30 hours a week. They may not have another health plan 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 prohibits small employer plan rates from increasing more than 15 percent per year due to members' health status. State law also requires guaranteed issue for small employer health plans. This means that an insurer cannot refuse to sell a policy to a small employer solely because of the employees' health status. • Large-employer or other group plans are offered by businesses that don't meet the small employer requirements and don't self-fund. Other groups -- such as churches, trade unions, and professional associations -- may also offer the plans. If a large employer offers only an HMO plan, the law requires the HMO to offer a POS option.
Large employers may offer coverage to a specific class of employees - such as executives - and not offer coverage to everyone else. However, if employers offer coverage to a certain class, they must offer it to all employees in the class equally. They are also prohibited from using health status as a reason for not offering coverage to a particular group or excluding an employee from plan membership. • 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 purchasing coverage from an insurance company or HMO. Coverages may vary by plan and employer, but are generally more inclusive and extensive than other plans.
Self-funded plans are regulated by the U.S. Department of Labor, but there are only a few federal requirements. TDI has very limited authority over self-funded plans. These plans have their own procedures for complaints and dispute resolution, so it's important to read your benefits handbook carefully. Questions and unresolved complaints should be directed to the DOL's Employee Benefits Security Administration (EBSA).For more information, call
1-866-444-EBSA (3272) 972-850-4500
• A Multiple Employer Welfare Arrangement (MEWA) is a plan offered by employers from a group of businesses that have joined together to offer medical coverage. Self-funded MEWAs are regulated by the U.S. Department of Labor and TDI. They must obtain a license from TDI unless an authorized carrier has assumed 100 percent of the MEWA's liabilities.
Covering Dependents
Children and grandchildren covered by a plan as dependents are eligible for dependent health care coverage until the age of 25. The plan may not require that the child live with the parent or within the geographical service area. Children with mental or physical disabilities who cannot financially support themselves may continue to be covered beyond the age of 25.
Large-employer plans that include dependent coverage must also provide coverage for children up to age 25. 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.
Self-funded plans may offer dependent coverage, but it's not required by state law.
If two spouses are covered by separate health plans, and both plans cover their dependents, the parent whose birthday occurs first during the calendar year pays first. However, if that parent's plan reaches its benefits maximum, the second parent's plan can take effect. In the event of a divorce, a court usually determines which parent's plan is a dependent's primary coverage.
The federal health care reform law requires plans to provide coverage up to age 26.
Preexisting Conditions
If you currently have a medical problem or have had one in the recent past, it may meet a plan's definition of a preexisting condition. You must disclose any preexisting conditions in your application for any health plan.
Plans may require you to wait months, or sometimes years, before paying benefits for treatment related to a pre-existing condition. An individual carrier may decline to cover you because of the condition or may insist on a policy rider that excludes treatment for the condition. Except for association plans, group carriers may not insist on a policy rider that excludes treatments for certain conditions.
The federal health reform law prohibits health plans from denying coverage or applying preexisting condition exclusions to coverage for children under age 19.
Waiting Periods
The maximum preexisting waiting period for an individual health plan is two years. The maximum waiting period for employer-sponsored health plans is one year.
Some plans may require a standard waiting period before new members are eligible to receive any benefits, regardless of whether they have a preexisting condition. If this is the case, your preexisting condition waiting period begins with the start of the standard waiting period.
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 preexisting conditions are covered as long as there is not a gap in coverage greater than 63 days. Prior coverage reduces your coverage on a month-for-month basis.
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