Basics of Texas Health Insurance
What is a Health Insurance Premium?
A health insurance premium is the amount of money that is paid to the insurer monthly, to keep the health insurance policy active.
Premium may be paid fully by the insured individuals. In the case of group plans, a portion (up to 100%) of the premium may be covered by the employer or the organization providing the coverage.
What is a Health Insurance Premium Rebate?
A Health Insurance Premium Rebate is the reimbursement of paid health insurance premiums to the insured by the insurer. According to the Affordable Care Act, each ACA-compliant insurer must return part of the premiums if the insured did not spend at least 80-85% of the total premium on covering medical treatments or seeing doctors.
Why Did I Get an MLR Rebate?
MLR is short for Medical Loss Ratio. MLR, also known as the 80/20 rule, is a requirement by the Affordable Care Act that insurers reserve at least 80% of paid premiums for healthcare costs alone. The remaining 20 percent can be used for administrative fees, marketing, and other running expenses.
When an insurer does not spend at least 80% of the collected premiums on the insured's needs, the insured can expect to be sent a rebate.
Insurers of small groups must adhere to the 85/15 rule, while insurers of larger groups have a wiggle room of 5%. Workplace insurance that covers at least 50 people is a large group. Fewer people than that per policy is considered a small group. The federal healthcare system provides an online instrument for insureds to check if their insurers need to pay a rebate based on the earlier definition.
How is Health Insurance Premium Rebate Calculated?
Health insurance premium rebate is calculated by adding all qualified expenditures on claims and services provided and dividing this amount by the collected premiums. The resulting sum, minus the required state and federal fees, is the rebate that an insured in an ACA-compliant plan may expect to get back.
Will I Get a Rebate Check From My Insurance Company?
It depends. In an individual insurance policy, the insured gets the rebate directly from the insurer. But in group health insurance plans, who gets the rebate may vary. If the employer paid all premiums on behalf of the staff, the employer gets to keep the rebate.
If the employees contributed to the payments, the employees may get the refund back in several ways:
- Direct cash payments,
- Benefits enhancement for the group health insurance members,
- Reduction in the price of future premiums.
Do not expect rebates if the health insurance coverage is provided by a self-insured employer.
Is a Health Insurance Premium Rebate Taxable?
Health insurance premium rebate may or may not be taxable, based on how it was paid and whether the premiums were claimed as a deduction or not. In most cases, if the premiums are paid with after-tax income - the rebate is tax-free.
Health Insurance Maximum-out-of-Pocket
Maximum-out-of-pocket (MOOP) amount of health insurance is the annual amount that the insured can expect to pay, in addition to the monthly premiums, in case the insurance is being used extensively. MOOP is calculated differently, based on the type of Texas health insurance:
- MOOP for the Affordable Care Act (ACA) compliant health plans include the deductible, co-insurance, and co-pay,
- MOOP for the Short-Term health plan usually excludes the deductible from the calculation.
What is a Health Insurance Deductible?
Health insurance deductible in Texas is an annual minimum amount that you pay out-of-pocket for medical bills before your health insurance policy starts providing coverage.
How Does Health Insurance Deductible Work?
When you purchase a health insurance product, you are brought under a healthcare services plan. However, your plan is not active until you pay what is known as a deductible. A deductible is a minimum amount in dollars you must pay for your healthcare expenses before your insurer starts to pay.
Suppose your plan requires a deductible of $1,000. It means that you must pay the first $1,000 of your healthcare expenses before your insurer starts to cover the bills. If you are paying a high deductible, your premiums are most likely lower, and vice versa.
If the cost of healthcare is lower than the deductible, the insured pays out of pocket. Separate healthcare expenses within the policy year can accumulate to meet the deductible benchmark. Your insurer tracks this spending. Keep in mind that not all healthcare-related expenses count towards the deductible. Each plan may be different, so verify your particulars with your insurer.
When you meet the deductible requirement, your insurer starts paying for your healthcare costs. Many marketplace health plans adopt a copayment or co-insurance payment scheme. In a co-payment, there is a fixed amount that you pay for every covered healthcare service you receive. A copay is mandatory irrespective of whether you have met your deductible.
Coinsurance is a shared payment plan between you and your insurer on a percentage basis. For example, if you are on a 20% coinsurance plan, it means that you will pay 20% of the total covered healthcare expenses.
Health Insurance Deductible vs. Other Types of Insurance
In health insurance, you pay the deductible directly to the service provider, while building up to the full coverage amount, compared to most other insurance types, where the deductible amount is deducted from the total claim pay-out.
A distinguishing feature of health insurance over the other insurance types is that healthcare insurers usually do not provide 100% coverage. Rather, the insurer agrees to pay either a percentage of your healthcare bill or the excess of a fixed limit of your payment.
What is Coinsurance on Health Insurance?
Coinsurance is a policy arrangement that shares the liability coverage between the insurer and the insured. There is an agreed percentage share of your medical bills that you pay every time you get medical care, while your insurer takes care of the balance.
How Does Healthcare Coinsurance Work?
Suppose your coinsurance is 25% and your healthcare service costs $1,000. If the deductible has already been fully paid, you get to pay $250, while your insurer pays the $750 balance. It is important to note that co-insurance can only be active after the deductible requirement is met. Until then, all expenses remain out-of-pocket.
Co-insurance is a unique feature of health insurance. Other insurance types cover losses up to a specified limit and leave the rest to the insured to pay out of pocket. Coinsurance is different because there is a shared arrangement from the inception of coverage.
What is a Copay in Health Insurance?
Copay in health insurance is a fixed amount you pay for a covered healthcare service. It differs from coinsurance in that the amount to be paid is fixed, and not on a percentage basis. A copay health insurance plan specifies how much you get to pay for each type of healthcare service from inception.
How Does Health Insurance Copay work?
Suppose a copay plan for a regular heath visit requires you to pay $50 for covered expenses. If your bill is $250, a copay arrangement means that you will pay $50 of the cost, while your insurer pays $200.
Completing deductibles is not a prerequisite for a copay in Texas. It means that your deductible and copayment can run concurrently. Some Texas healthcare insurance plans combine coinsurance and copay arrangements in a health plan. Both run differently and are not dependent on each other. Like coinsurance, most healthcare insurance plans run on joint arrangements as a copay. A distinct feature of copay is that the amount to be paid is fixed irrespective of the costs. Other insurance types (property and casualty, for example) rather have a fixed maximum limit for covered losses, beyond which the insured pays the balance.
What is Public Health Insurance in Texas?
Public Health Insurance in Texas refers to healthcare policies that are sponsored by the Texas state government in partnership with the federal government. While such coverage is available to almost everyone in the state, the target audience is low-income earners, their families, seniors, and other vulnerable groups. The Texas Insurance marketplace runs two main public health insurance programs: Medicare and Medicaid.
Medicare health insurance program in Texas is a federal initiative for seniors over 65 years, younger persons with disabilities, persons with an End-Stage Renal Disease diagnosis, etc.
Medicaid is a jointly funded program by the federal and Texas state governments. Most residents in Texas are beneficiaries of the program. This primarily includes low-income earners, low-income families, pregnant women, persons with disabilities, and groups that qualify for coverage for other reasons.
The Children's Health Insurance Program, CHIP, is a jointly funded insurance program that focuses on children. Eligible Texas children are those who are uninsured and teenagers that do not qualify under other insurance plans.
Tricare is a US Department of Defense-sponsored program that covers healthcare service costs for serving military personnel and their families. A similar insurance program funded by the US Department of Veterans Affairs (VA) covers costs incurred by veterans and retired military servicemen.
All the aforementioned public health insurance programs have one thing in common: subsidy. The government covers the lion's share of the costs of medical care, leaving a little or nothing at all to the insured's responsibility. Where payment is necessary, it is much lower compared to the actual cost of the healthcare service. Some government-funded insurance programs like the Veterans Affairs run a system of copayments and deductibles but are a lot cheaper than private options. Medicaid and Medicare particularly have a wide variety of plans to choose from, so that almost everyone in the state can afford a plan.
What is Private Health Insurance?
Private Health Insurance is an insurance product created by non-government agencies. It is the commercial health insurance side of the Texas insurance market. Competitive pricing and customer satisfaction are typical of private health insurance plans. A private health plan in Texas may fall into one of four main categories:
Employer-sponsored plans: as the name suggests, this private health plan is offered as a part of an employment package. By Texas law and federal regulations, all employers of at least 20 persons must provide this private health plan for their employees. It also means that the plan ends when the employee resigns or changes jobs. All group plans are always ACA-compliant.
Independent individual/family health plans: These refer to private plans that Texas residents can purchase on their own - independently, without an affiliation with any organization. The independent health insurance market provides the widest array of options and combinations based on the needs of insurance seekers. ACA-compliant plans can be purchased on your own from the marketplace, or with an assistance of an insurance agent (cost-free to the insured).
Short-term health insurance Texas: going by its name, the plan covers the insured for a limited time frame, usually for up to 3 years. Short-term health insurance is not ACA-compliant, so while it may provide significant savings to the insured, you need to understand its drawbacks before opting for this coverage. Discuss these options with a Texas-licensed insurance agent, to see if short-term coverage is a feasible option for your situation.
Indemnity plans: indemnifying plans reimburse either the patient or care provider of the cost of care. Indemnity plans are usually purchased as a supplement to a major medical coverage. Short-term health plans are almost always supplemented by at least 1 indemnity plan, to cover the gaps in coverage.
Additionally, you may purchase insurance for specific reasons, either as supplemental coverage or a stand-alone policy. Examples are critical illness, accident, dental, and vision care health plans.
What is The Purpose of Private Health insurance?
Private health insurance in Texas covers policyholders for medical expenses that are not insured under the public health insurance programs. Specialized medical care often costs a lot more than most policyholders can afford to pay out-of-pocket. Private health insurance covers the insured up to the limits of the policy.
What is Covered by Private Health Insurance?
Private Health Insurance in Texas comes in 2 mains styles of coverage:
- Affordable Care Act (ACA) compliant private health insurance providers mandatorily cover essential health needs. The regulatory authority of Texas insurance (TDI) also has an additional set of requirements for this category.
- Non-ACA compliant health plans: also referred to as Alternative Healthcare plans. Their coverage does not meet the ACA requirements: however, they are more affordable.
Examples of Common Non-ACA health plans in Texas:
Short-term and Indemnity health plans, as the name implies, provide coverage for a short period of time or occasional healthcare services that are not covered within the main framework of an ACA-compliant health plan. It is not necessarily cheaper, but it provides coverage that is easier to obtain for persons who do not have a standard health plan, or as a supplement to an existing plan.
Discuss your coverage questions with a Texas-licensed health insurance professional.
What is NOT Covered by Private Health Insurance?
The following are not covered by private health insurance:
- Health conditions not captured in the policy
- Health expenses associated with a cover-up for a crime
- Medical attention outside of the hospital, e.g., personal visits to the doctor, treatments by unapproved alternative medicine caregivers
- Luxury and cosmetic health choices, e.g., gold tooth installation, liposuction, etc.
What are the Advantages of Private Health Insurance?
The benefits of private health insurance in Texas are:
- Reimbursements for hospital costs are prompt. The administrative process is quicker compared with the public health insurance system.
- You can choose your healthcare provider or retain an existing one.
- There are more choices of coverages and plans to choose from
- Fewer restrictions to qualify (based on the type of insurance)
- Care providers usually have better infrastructure, facilities and offer more privacy than in the public health system.
- You can get reimbursements from the public health system for private health services, especially if you are on HIPP.
What are the Disadvantages of Private Health Insurance?
- Private health insurance plans in Texas are more expensive than public health plans
- There is no perfect private plan. The coverage you get is clearly stated in the contract. So, you must read the contract and understand the terms. You do not want to be in a scenario where you need to use the coverage, but something in the policy language or exclusions stops you from doing so. Always consult with a state-licensed health insurance professional - who can evaluate your needs and suggest solutions to fit your particular needs.
- Private health insurance is as much profit-oriented as it is customer-oriented. Therefore, the services you get rest heavily on how compliant you have been with your responsibilities to the policy. To put it differently, if you fall behind in your premiums, you risk losing coverage soon.
Before you purchase a private health insurance plan in Texas, be sure to evaluate all the available options. Ask questions about the terms of an agreement in each policy. Always read the exclusions and consult a licensed insurance expert if you need further guidance or professional advice.
What are the Types of Private Health Insurance?
There are two basic types of Private Health Insurance in Texas:
Group Health Insurance : this is a private health plan that provides coverage for a group of persons. The employer-sponsored health plan is a good example of group health insurance in Texas. The minimum number required for this plan is 20 persons.
Individual/family Private Health Insurance is an insurance plan that is purchased independently from a group or organization affiliation, usually with the assistance of a health insurance agent.
The key difference between the two types of private health insurance is that all group health plans are compliant with Affordable Care Act (ACA) rules and regulations, while Individual or family private health insurance may or may not be ACA-compliant.
What is a PCP?
A Primary Care Physician (PCP) is a doctor or medical specialist assigned to you when you purchase an HMO plan. In Texas, insureds have the liberty of choosing their PCP. If the insured needs to see a specialist for their health needs, they must get a referral from the PCP. Due to this process, PCPs are also referred to as the Gatekeepers.
What is an HMO?
A Health Maintenance Organization (HMO) in Texas is a health insurance plan that covers both the costs and delivery of healthcare for a fixed prepaid premium under an insurance plan, be it workplace or private. Usually, a group of medical insurance providers comes together to pay for medical care provided through doctors and other providers who are presently in partnership with the HMO.
HMO can be purchased individually, so you may decide to or not to get it. The system runs on referrals for specialist treatment. You can only choose a care provider from a suggested list if you will get coverage. Employers must pay a capitation fee to join the network.
What is a PPO?
PPO is short for Preferred Provider Organization. In Texas, PPO policies cover insureds within a defined but flexible network of healthcare providers. Outside this network, the insured still gets coverage, but with higher deductibles and premiums. Unlike an HMO, a referral is not compulsory to get coverage.
What is an EPO?
EPO stands for Exclusive Provider Organizations (EPO). In Texas, EPO policies cover healthcare expenses only within the boundaries of selected care providers. EPO differs from PPO in that there is no coverage outside the list of care providers, except for emergencies.
What is a POS?
POS means Point-of-Service. POS plans in Texas work internally like an HMO but pay higher medical expenses if you are required to see a healthcare service provider outside the network. For instance, if you are on a Point-of-Service plan, you may see a cardiologist outside the network of providers. Referrals are mandatory in the POS health systems.
Who Needs Private Health Insurance?
Health insurance is the most important insurance for everyone, and anyone who is not currently covered by a public health plan needs private health insurance.
The Texas Health Insurance market is one of the most diverse in the country in terms of the presence of insurance companies and the number of available policy plans. There are three main types of health insurance on the Texas market:
- Affordable Care Act (ACA) Health Insurance (Group or Individual)
- Alternative (non-ACA-compliant) Health Insurance (Individual or Family Short-Term)
- Indemnity and Supplemental Health Insurance (to supplement either of the above).
What are Alternative Health Plans?
Any health insurance plan that does not conform to the Affordable Care Act (ACA) rules and regulations is considered an alternative health plan. The most common reason to opt for an alternative health plan is to save money.
All alternative health plans have these features in common:
- Limited coverage
- Lower cost
Due to multiple differences and exclusions of each alternative health plan, it is best to seek advice from a Texas-licensed insurance professional, to go over the locally available options based on your specific needs.
Below are some of the Alternative Health Plans available in Texas:
Specified Disease Plan
A Specified Disease Plan in Texas provides coverage for a type/group of diseases listed in the policy. For example, a specified disease policy for cancer only pays for cancer.
Short Term Health Insurance
Short Term Health Insurance in Texas provides coverage for a short period, usually up to a year, but may be renewable for up to three years. Pre-existing conditions are generally excluded, except for some multi-year plans, where select conditions may be covered after a year or more of continuous coverage.
Due to its restrictions and plan-specific limitations, short-term health coverage is generally recommended as a temporary solution. To assist with bridging the gaps in coverage, short-term health insurance is usually sold along with supplemental and/or indemnity plans.
Self-insured Health Insurance
A self-insured health insurance plan has the employer paying its claims. In most cases it applies to large companies with substantial enough assets, to take on the financial risk of handling their own employee's health care payments. The participation of an insurance company, HMO, or agent is primarily just for administrative effectiveness.
Accident Plan
An Accident Plan in Texas covers part of the costs of treatment of accident-related injuries, through coinsurance or copay. While an Accident plan is a limited benefit plan, it can be a useful protection tool for persons with an accident-prone job, lifestyle, or hobby.
Fixed Indemnity Insurance
Fixed Indemnity Insurance in Texas provides a per-diem payment based on a period of care, rather than paying healthcare providers for specified services. Some Texas employers may provide this coverage instead of (or in addition to) an ACA-compliant group health plan.
Discount Health Plan
A Texas Discount Health Plan is not insurance. Discount health plan allows the subscriber to pay less for specific health care services based on monthly fee payment. Discount Health Plans in Texas may cover pharmacy, vision, and hearing services. For the discount to be active, subscribers usually must get care within a restricted network of providers.
Subscription Health Plan
A Subscription Health Plan gives members coverage by subscribing to them for the use of specific services, medical facilities, and doctors for the duration of the plan. Subscription may be annual or monthly.
If you require services outside the subscription group's capabilities, you must pay the full price or use another insurance to cover it.
Association Health Plan
An Association Health Plan ( AHP ) is a category of group health insurance for employers that gives smaller businesses access to health insurance savings available to health coverage plans of larger groups. Recent legislation allows smaller businesses to team up and fund an AHP based on the commonality of interests. Interests could be along business/professional/location lines.
The team-up gives the small business group the effect of a large business, thus granting access to a larger group of health plans. The Texas Department of Insurance defines a small employer as those having less than 51 employees on board.
Unlike the traditional operations of AHPs, the basis for recent reviews has made it possible for smaller businesses to enjoy the benefits of savings and flexibility of large employer health plans. Now, small employer group policies require only between 8-18% of a large employer group savings to qualify for the same benefits. Small employer groups can also increase savings by self-insuring.
To access AHP coverage, membership is key. Your membership due is the premium you pay. The limitation to this plan is the blanket policy effect that large employer health plans provide. If there are special health needs not listed in the policy, individual members may need to get back up health plans to handle them.
Always discuss your insurance needs with state-licensed and experienced insurance professionals, who can advise you on the full spectrum of the plans offered in the state of Texas.
