Frequently Asked Questions

Question: I want to provide health coverage for my employees, but I am not sure what type of plan I want to offer. What is the difference between a plan that uses a health insurance policy to guarantee claim payment and a self-funded health plan?

Answer: Health insurance is a contract between an insurance company licensed to do business in Texas and an employer. Under a health insurance plan, the money to pay claims comes from the insurance company's reserves and other assets. The health insurance policy and the company that issues it are subject to TDI [Texas Department of Insurance] regulation and must meet various legal requirements.

A self-funded health plan, also known as a self-insurance or a self-funded employee benefit plan, is a substitute for an insured health plan. Under a self-funded plan, an employer or an employee organization establishes and maintains a fund to pay employees' health claims. Employers or employee organizations that offer self-funded plans must file various documents and reports with the United States Department of Labor and the Internal Revenue Service.

Single employer self-funded plans fall under the jurisdiction of the federal government and are generally exempt from state regulations regarding coverages, rates, and claim practices.

If an insurance company fails, there is guarantee association to step in and pay benefits. If a self-funded plan fails however; there is no guarantee association and TDI cannot assist covered persons if disputes arise in connection with coverage. Self-funding works best for large groups and usually is not recommended for small employers.

Question: Can my carrier exclude health insurance coverage for my employees who have pre-existing conditions?

Answer: For small employers, the guaranteed issue provision of the Small Employer Health Insurance Availability Act prohibits a carrier from refusing to cover all eligible employees of a qualified small employer. Employees may be subject to either a 12-month pre-existing conditions (past or current illnesses) limitation or a 90-day affiliation period for new enrollees, as elected by the carrier and uniformly applied to all small employers.

The act contains additional provisions that require the carrier to credit and/or waive the pre-existing limitation or affiliation period for any employee covered by another health benefit plan during the last twelve months or any portion of that time.

The act does not prohibit a carrier from charging different rates for businesses with healthy employees and those with employees who have health problems. However, the act does establish requirements relating to the amount a carrier can charge a group in relation to what it charges similar groups.

Note: As of 12/96, current Texas law does not prohibit insurance companies from denying coverage to large employers who have employees with pre-existing conditions.

Question: What are some questions I should ask when evaluating a health care plan?

Answer: Compare benefit levels, as well as any deductibles, co-insurance, maximum out-of-pocket expenses and dollar or day limits on certain medical treatments. In the case of HMOs, you should ask about co-payments and get lists of available providers. Also look at the list of providers to see if the provider you want is accepting new patients or is designated as "temporarily not accepting new patients."

Pre-existing Conditions...: Are you required to wait for a length of time before certain medical problems are covered? How long? Will the be permanently excluded?
Premium Increases...: Under what conditions can the premium be increased? (On the policy anniversary or renewal date, your birth date, or both? Can the premium also change when you reach a certain age?) How much notice must the health benefit plan give you if it raises your premium? What is the health benefit plan's premium increase record for the last five years?
Additional Costs...: How much is the deductible per person? Per family? Per illness? Per hospital confinement? Does the deductible increase if another health care plan pays a portion of your bills? What will be your maximum out-of-pocket expenses? How do the benefits compare with actual costs for physicians' visits, hospital care, or surgery in your area? How much is your HMO co-payment when you visit your primary care physician or receive services? Doe the HMO co-payment change for different services?
Termination...: Under what conditions can you or the health benefit plan terminate coverage? How much notice must the health benefit plan give you before terminating coverage?
Covered Benefits/Services...: What benefits/services does the health benefit plan cover? Is any important benefit or service missing from the list? Your health care coverage may not pay for services unless they are specifically named in the policy.
Restrictions...: Does the health benefit plan pay for office visits? What illnesses or services are not covered due to policy exclusions or riders? Does the health benefit plan have a lifetime maximum on what it will pay? Is there a lifetime maximum for certain treatments or illnesses? Is it per person? Per family? Per illness? Per hospital confinement? Will the health benefit plan pay claims in addition to any other health care coverage? To receive full benefits, must you notify the health benefit plan of other coverage you may have before filing a claim? Will the health benefit plan pay for treatment at a walk-in surgical center or a hospital's out-patient or day surgery department? Many medical services today do not require hospitalization.
Other Policy Limits...: Check the policy limits for these and other items; daily hospital room and board; medicine, tests, or other hospital expenses; specific types of surgery; physicians' visits; the number of hospital days; the number of physicians' visits during a hospital stay; the number of visits for any particular benefit or service; and amounts paid for specialists, such as anesthesiologists.

Question: My health care premimums keep going up. What can I do?

Answer: Most states, including Texas, do not have authority to set or disapprove rates for health care coverage premiums. Each insurance company, HMO, or other health plan sets its own rates. Those rates may vary depending on a number of factors including:

the kinds and amounts of benefits paid;
the amount of any deductibles;
the number of covered dependents; and
the claims experience of its customers

Insurance companies and HMOs must give 30 days notice to group policyholders before increasing group coverage premiums. (The group policyholder, in many cases, is your employer. Notification of each insured person is not required, except in certain cases where payments are made by bank draft.)

If your premiums are rising, re-examine current benefit levels and ask your insurance company or HMO to negotiate changes that will lower your premium or minimize any increase. Some companies negotiate and some do not. If the company will negotiate, you may be able to revise your benefit package to reduce the premium. Be careful not to give up an essential benefit. Options for negotiation might include:

paying a higher deductible and/or co-payment;
increasing your maximum out-of-pocket payment;
reducing or limiting a medical benefit; or
accepting "pre-certification" before costly medical procedures are allowed.

Question: Should I change insurance companies or HMOs to lower my premiums?

Answer: Don't switch just to get a lower price. Premiums can rise, and cheap coverage can become expensive. Before changing coverage, get answers to these questions:

Will lower premiums mean fewer benefits than you want?
Will a past or present health condition cause problems in finding other coverage?
Will your medical history result in restrictions in the new policy?
If you drop unneeded benefits, will you be allowed to add the back when you do need them?

Never drop your current coverage until the new coverage is in effect. Most companies do not begin coverage until they approve your application and deliver your policy. Make sure you know the coverage's effective date. Carefully compare the old and new health benefit plans, including benefits, limitations, and exclusions.