Protecting Your Family and Property
In this chapter, you'll find information on different types of insurance, including homeowners, auto, medical, dental, life and title insurance, as well as practical tips on reading policies and shopping for coverage. As you organize your relocation to the United States, it's also a good idea to review your family's insurance needs. For your home, you're probably planning to purchase new home furnishings, appliances and other equipment that should be noted in your updated home inventory. If you'll be commuting to and from the office each day, you'll need to know how many miles you'll be driving. Keep copies handy of previous auto, home and health policies for easy reference when completing new insurance applications - it will save you time and aggravation.
Quick Tips to Help You Select Insurance Coverage
Here are tips to assist you with all of your insurance shopping needs.
* Get price quotes from several companies and compare the rates and coverages.
* Include independent agents in your search. Some agents only represent a single company or company group. Independent agents typically represent several companies and can give you multiple quotes at one time.
* Determine what coverages you want and need. For instance, if you have valuable car stereo equipment or if you need more than basic residential coverage for jewelry, collections, or other valuables, you may need endorsements that change or add coverage. Endorsements that add coverage will raise your premium.
* Answer questions truthfully when you apply for insurance or ask for a rate quote. Wrong information may result in an incorrect price quote, rejection of your insurance application, or cancellation of your policy.
* Consider higher deductibles. Your policy probably will have deductibles. A deductible is the amount you have to pay out of pocket on your claim before the insurance company pays. The higher your deductibles, the lower your premium. Choose the highest deductibles you can afford.
* Ask about discounts. Insurance companies may offer policy discounts that will lower your premium. Ask your agent what discounts the company offers.
* Make sure you have uninterrupted coverage. Never cancel an existing policy until you get your new policy or a written "binder." A binder proves you have coverage until the company issues your policy.
* Don't pay cash to an individual agent. Pay with a personal check or money order made out to the insurance company or agency. Get a receipt for your premium payment.
* If a company turns you down, keep shopping. Different companies have different criteria for accepting customers.
Homeowners insurance covers both damage to property and liability or legal responsibility for any injuries and property damage policyholders or their families cause to other people. This includes damage caused by household pets. Damage caused by most disasters is covered but there are exceptions. Standard homeowners policies do not cover flooding, earthquakes or poor maintenance. Flood coverage is provided by the federal government's National Flood Insurance Program, although it is purchased from an insurance agent. Earthquake coverage is available either in the form of an endorsement or as a separate policy. Most maintenance-related problems are the homeowners' responsibility.
A standard homeowners insurance policy includes four essential types of coverage.
1. Coverage for the structure of the home
This part of a policy pays to repair or rebuild a home if it is damaged or destroyed by fire,
hurricane, hail, lightning or other disaster listed in the policy. It will not pay for damage
caused by a flood, earthquake or routine wear and tear. Most standard policies also cover
structures that are not attached to a house such as a garage, tool shed or gazebo.
2. Coverage for personal belongings
Furniture, clothes, sports equipment and other personal items are covered if they
are stolen or destroyed by fire, hurricane or other insured disaster. Most companies
provide coverage for 50 percent to 70 percent of the amount of insurance on the structure
of a home. This part of the policy includes off-premises coverage. This means that
belongings are covered anywhere in the world, unless the policyholder has decided
against off-premises coverage. Expensive items like jewelry, furs and silverware are
covered, but there are usually dollar limits if they are stolen. To insure these items to
their full value, individuals can purchase a special personal property endorsement or
floater and insure the item for its appraised value.
Trees, plants and scrubs are also covered under standard homeowners insurance --
generally up to about $500 per item. Perils covered are theft, fire, lightning,
explosion, vandalism, riot and even falling aircraft. They are not covered for damage
by wind or disease.
3. Liability protection
Liability covers against lawsuits for bodily injury or property damage that policyholders
or family members cause to other people. It also pays for damage caused by
pets. The liability portion of the policy pays for both the cost of defending the policyholder in court and any court awards -- up to the limit of the policy. Coverage is not just in the home but extends to anywhere in the world. Liability limits generally start
at about $100,000. An umbrella or excess liability policy, which provides broader
coverage, including claims for libel and slander, as well as higher liability limits, can
be added to the policy.
4. Additional living expenses
This pays the additional costs of living away from home if a house is inhabitable due
to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant
meals and other living expenses incurred while the home is being rebuilt. Coverage
for additional living expenses differs from company to company.
People who own the home they live in have several policies to choose from. The
most popular policy is the HO-3. It provides coverage for the structure of the home
and personal belongings as well as personal liability coverage. It also provides the
broadest coverage, protecting against 16 disasters or perils listed below.
* Fire or lightning
* Windstorm or hail
* Riot or civil commotion
* Damage caused by aircraft
* Damage caused by vehicles
* Vandalism or malicious mischief
* Volcanic eruption
* Falling object
* Weight of ice, snow or sleet
* Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance
* Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system
* Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance
* Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)
Owners of multifamily homes generally purchase an HO-3 with an endorsement
to cover the risks associated with having renters live in their houses. Other types of
policies for home owners are the HO2, which provides more limited coverage, the
HO-1, a bare bones policy that is not widely available, and the HO-8, designed for
older homes. There is also a version of the HO-2 designed for mobile homes.
The HO4-policy was created specifically for those who rent the home they live
in. It covers a policyholder's belongings against all 16 perils. It also provides personal
liability coverage for damage the policyholder or dependents may cause to third
parties. The HO-6 policy was designed for owners of condominium and cooperative
units. It provides coverage for belongings and the structural parts of the condominium
or co-op that the policyholder owns. It protects against all 16 perils and provides
personal liability coverage. Both cover additional living expenses.
Levels of Coverage
There are three coverage options.
1. Actual Cash Value
This policy pays to replace the home or possessions minus a deduction for depreciation.
2. Replacement Cost
This policy pays the cost of rebuilding or repairing the home or replacing possessions
without a deduction for depreciation.
3. Guaranteed/Extended Replacement Cost
This policy offers the highest level of protection. A guaranteed replacement cost
policy pays whatever it costs to rebuild the home as it was before the fire or other
disaster -- even if it exceeds the policy limit. This gives protection against sudden
increases in construction costs due to a shortage of building materials after a widespread
disaster or other unexpected situations. It generally won't cover the cost of upgrading the house to comply with current building codes. However, an endorsement (or an addition to) the policy called Ordinance or Law can help pay for these additional costs.
Factors that Affect Your Premium
Your premium will be based on several factors including:
* where you live
* level of fire protection available in the area
* construction type of your home (brick or frame)
* type of policy you purchase and
* amount of coverage you buy
Ask about Discounts
Companies may offer premium discounts if you take steps to reduce the chances of a loss. Each company sets the amount of the discounts it offers. Following are some of the more common homeowners discounts available:
* impact-resistant roof
* noncombustible roof
* burglar, fire, and smoke alarm systems
* automatic sprinkler systems
* fire extinguishers
* premises in good condition (companies set their own standards)
* age of house (companies set own standards)
* marking personal property with an identifying number (inspection required)
* good claims experience for three consecutive years
* other policies with same company or group
* house insured to full replacement cost
* senior citizens discount
Regardless of how safe you try to be on the road, it's impossible to predict the actions of other drivers. That's why auto insurance coverage is so important. Most state laws require people who drive in the U.S. to be able to pay for automobile accidents that they cause.�Most drivers do this buy buying automobile liability insurance.
Auto insurance provides property, liability and medical coverage:
* Property coverage pays for damage to, or theft of, the car.
* Liability coverage pays for the policyholder's legal responsibility to others
for bodily injury or property damage.
* Medical coverage pays for the cost of treating injuries, rehabilitation and
sometimes lost wages and funeral expenses.
Most states require drivers to have auto liability insurance before they can legally
drive a car. (Liability insurance pays the other driver's medical, car repair and other
costs when the policyholder is at fault in an auto accident.) All states have laws that
set the minimum amounts of insurance or other financial security drivers have to pay
for the harm caused by their negligence behind the wheel if an accident occurs. Most
auto policies are for six months to a year. A basic auto insurance policy is comprised
of six different kinds of coverage, each of which is priced separately.
1. Bodily Injury Liability
This coverage applies to injuries that the policyholder and family members listed on
the policy cause to someone else. These individuals are also covered when driving
other peoples' cars with permission. As motorists in serious accidents may be sued
for large amounts, drivers can opt to buy more than the state-required minimum to
protect personal assets such as homes and savings.
2. Medical Payments or Personal Injury Protection (PIP)
This coverage pays for the treatment of injuries to the driver and passengers of the
policyholder's car. At its broadest, PIP can cover medical payments, lost wages and
the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.
3. Property Damage Liability
This coverage pays for damage policyholders (or someone driving the car with their
permission) may cause to someone else's property. Usually, this means damage
to someone else's car, but it also includes damage to lamp posts, telephone poles,
fences, buildings or other structures hit in an accident.
This coverage pays for damage to the policyholder's car resulting from a collision
with another car, object or as a result of flipping over. It also covers damage
caused by potholes. Collision coverage is generally sold with a deductible of $250 to
$1,000 -- the higher the deductible, the lower the premium. Even if policyholders are
at fault for an accident, collision coverage will reimburse them for the costs of repairing
the car, minus the deductible. If the policyholder is not at fault, the insuranceNUNCEICS
company may try to recover the amount it paid from the other driver's insurance
company. If the company is successful, policyholders will also be reimbursed for the
This coverage reimburses for loss due to theft or damage caused by something other
than a collision with another car or object, such as fire, falling objects, missiles,
explosions, earthquakes, windstorms, hail, flood, vandalism and riots, or contact with
animals such as birds or deer. Comprehensive insurance is usually sold with a $100
to $300 deductible, though policyholders may opt for a higher deductible as a way of
lowering their premium. Comprehensive insurance may also reimburse the policyholder
if a windshield is cracked or shattered. Some companies offer separate glass
coverage with or without a deductible. States do not require the purchase of collision
or comprehensive coverage, but lenders may insist borrowers carry it until a car loan
is paid off.
6. Uninsured and Underinsured Motorist Coverage
Uninsured motorist coverage will reimburse the policyholder, a member of the family
or a designated driver if one of them is hit by an uninsured or a hit-and-run driver.
Underinsured motorist coverage comes into play when an at-fault driver has insufficient
insurance to pay for the other driver's total loss. This coverage will also protect
a policyholder who is hit while a pedestrian.
Shopping for Auto Insurance
Rates vary widely among companies, so it pays to shop around. Following are some tips to help you find the best deal for your money:
* Decide before shopping what coverages you need.
* Consider choosing a higher deductible. Your deductible is the amount you must pay before the insurance company will pay. Higher deductibles will lower your premium, but you'll have to pay more out of your own pocket if you have a claim.
* Get price quotes from several companies. Make sure the quotes are for the same coverages.
* When getting a price quote or applying for insurance, answer questions truthfully. Wrong information could result in an incorrect price quote or could lead to a denial or cancellation of coverage.
* Ask your agent whether you qualify for any discounts the company might offer.
* Consider factors other than price, including a company's financial rating, complaint index, and license status. The financial rating indicates a company's financial strength and stability, and the complaint index is an indication of its customer service. Buy only from licensed companies and agents. It is against the law to sell insurance without a license in the U.S.
Coverage for Rental Cars
Auto rental agencies offer collision damage waivers and liability policies. The collision damage waiver is not insurance. It is an agreement that the rental company will waive its right, with certain exceptions, to recover from the renter the cost of damage to the car.
If you have auto insurance, your policy may already cover damage to a rental car. Your coverage limit, however, might be less than the value of a rental car. Read your policy to know what's covered and the coverage limits. If your coverage limit is too low, consider increasing it. You will pay more in premium, but it might be cheaper than buying additional coverage through the rental agency, especially if you rent cars often.
If you don't own a car, but borrow or rent cars often, you can buy a non-owner liability policy. A non-owner policy pays for damages and injuries you cause when driving a borrowed or rented car, but it does not pay for your injuries or damage to the car you were driving.
So, how do you learn about your health care options and find a family doctor? Of course, your employer should be your first stop. Your company's human resources office can usually provide you with literature about hospitals and doctors that will accept the company's insurance. Most hospitals have comprehensive Web sites to aid in the research process.
An important source that is not a referral service:
* DoctorFinder provides basic professional information on virtually every licensed physician in the United States, which includes more than 814,000 doctors. AMA member physicians are offered an expanded listing that contains additional information such as office hours, accepted insurance providers, educational history and other helpful information. http://webapps.ama-assn.org
Family, friends and co-workers also are a good resource for finding a physician. Ask what the people like best and least about their doctors. When searching for a physician, make sure the doctor is board certified. All U.S. board-certified physicians are listed with the American Board of Medical Specialties. Visit (www.abms.org) or call 866-272-2267.
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, co-pays, 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 important considerations. Guaranty associations pay the claims of licensed carriers that become insolvent. If your company isn't licensed, your claims could go unpaid.
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?
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 Health Plans
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 you'll have to pay to participate in the plan 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.
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 Health Plans
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, the trade-off for managed care is reduced choice for increased affordability. Managed care plans are typically 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," that specifies the drugs it will cover.
There are three types of managed care plans, each with a different level of provider choice:
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 network. Your primary care physician oversees all of your medical care and provides referrals to specialists and other providers.
HMOs may pay primary care physicians a set monthly fee for each member, regardless of the amount of covered services performed.
HMO members with a point-of-service (POS) option are allowed 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.
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 - the fee you'll pay to participate in the plan.
Deductibles - amount that you must pay out of your own pocket before your plan will begin to pay.
Copayments - 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 amount 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 - percentage of the cost for health care services that you must pay after you've met your deductible. Coinsurance applies to network and out-of-network care in PPO and POS plans.
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.
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 U.S. residents 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. 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 another health benefit plan 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 in small employer health plans due to members' health status. Any carrier that discontinues a small employer plan must automatically accept the group into any other employer plan that it offers, 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.
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 U.S. Department of Labor's Employee Benefits Security Administration (EBSA). For more information, call EBSA 1-866-444-EBSA (3272)
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 of the 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 offer or deny coverage to only certain employees in a group or charge different rates to different employees in the same group. 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 which employees 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 at least 31 days from their start date to decide if they want to enroll in a plan. Carriers must also offer a 31-day "open enrollment period" each year to allow existing employees to join the plan. 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 enroll 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 the carrier offers 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 can 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 larger number of people.
The following are common types of coverage you can usually buy as an individual:
* HMO plans offer managed care plans that pay for covered health services if you use your HMO's network of providers or receive authorization before obtaining care outside the network.
* Major medical policies cover hospital stays and physician services in and out of the hospital. They also may be offered as PPO plans.
* Hospital surgical policies cover only expenses directly related to hospital and surgical services, such as daily room, surgery, and doctor charges.
* Hospital indemnity policies pay up to a maximum fixed amount for each day you are in the hospital.
* Specified or dread disease policies only cover specific illnesses detailed in the policy, such as cancer or AIDS. This coverage may also be offered as a rider to extend the other types of individual coverage.
* Short-term policies only last a specified length of time, not to exceed 12 months. People who lose coverage but expect to gain it back often purchase these policies.
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.
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.
Children and grandchildren covered by a plan as dependents 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 area or to live with the parent.
Self-funded plans may offer dependent coverage, but it's not required by state law. Confirm your benefits with your benefits coordinator if you have a self-funded plan.
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 or allow dependent coverage must also provide automatic coverage for any newborn child for the first 31 days. You must notify your carrier if you want to continue coverage for the child beyond this period.
Large-employer plans that include dependent coverage must also provide coverage for children up to age 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, 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 a carrier may offer several different consumer choice plans.
The following charts list the minimum required benefits for consumer choice and state-mandated health plans. The requirements are different for individual, small-employer, and large-employer plans and for plans administered by an insurer or an HMO.
"SMP" denotes a state-mandated plan and "CCP" denotes a consumer choice plan. Benefits labeled "Yes" must be included as part of the plan; benefits labeled "No" are not required; and benefits labeled "Offer" must be offered, but you may decline any or all of them.
Federally Mandated Benefits
In addition to benefits required by state law, health plans must abide by federal law and offer maternity and newborn coverage and mastectomy benefits.
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.
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
Carriers may deny payment or continuation of any treatment if they deem that it is not "medically necessary." Many health plans perform "utilization reviews" 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 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 a complaint about a self-funded plan, contact the U.S. Department of Labor's Pension and Welfare Benefits Administration 972-850-4500.
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 the 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. Individual plans can also define a pre-existing condition as one with symptoms that are 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 because you have a pre-existing condition or 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. 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.
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. Guaranty associations pay the claims of licensed carriers that become insolvent. If your company isn't licensed, your claims could go unpaid.
Ask your friends, family, and physician for health plan recommendations. Be sure to ask these questions before buying a health plan:
* Will the plan allow you to visit your choice of physicians and hospitals?
* Are there limits on medications, referrals to specialists, or treatments and surgeries?
* 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 annual or lifetime maximums?
When you apply for coverage, 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 and request a return receipt.
Health Plan Rates
Most states do not have the authority to regulate or approve health plan rates. 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:
* Coverages. The more conditions your plan covers, the greater the carrier's risk. Premium rates increase accordingly.
* Deductibles. Plans with higher deductibles typically 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. Young males typically incur lower medical costs than young females, 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. Plans with a large number of young females or older males generally have higher 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.
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 if you become sick or injured and can result in longer waiting periods before pre-existing conditions are covered by a new plan.
If you are concerned about physician fees or hospital charges, check with your plan to see if the provider's treatment cost estimate 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.
Don't be afraid to ask a physician or provider about the costs of tests or services. Take the following actions if you're concerned about a fee or charge:
--Request an itemized bill and review it. Ask question about billings you do not understand. If the explanation doesn't make sense, check with your plan.
--Check to see if the physician or provider used 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 if you were charged for a service you didn't received.
--Utilize your county medical association. Grievance committees at the county level accept complaints against physicians or providers and work as intermediaries in fee disputes.
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, even 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. If the carrier does drop the plan, it must offer the policyholders who lose coverage the right to purchase any other plan the carrier offers.
--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 reconsider 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.
--With 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:
--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 caused by 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.
If you lose your group coverage for employment-related reasons, you may be able to continue 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 to 18 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 any 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 they accept, the employee, spouse or dependent child must pay the full premium and 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 Department of Labor's Employee Benefits Security Administration 866-444-3272.
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 them to show you the policy language they used to deny the claim. If you are 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.