Texas Health Insurance Introduction

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.