I joined OPIC as a staff attorney in 2011. I specialize in life, health, and disability insurance law. I know that consumers can find themselves frustrated with these insurance issues at very difficult times in their lives—during sickness, after an injury, and after the loss of a loved one. I am grateful that I can utilize my expertise to educate and empower insurance consumers as they navigate these challenges.
Managed care plans are the most common type of individual coverage available in Texas. To help you choose a plan that works for you, this article compares three common types of managed care plans: Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Exclusive Provider Organizations (EPOs). To contain costs, these plans contract with physicians, hospitals, and other health care providers to create the health plan’s network. These plans vary in many ways, including how they structure cost sharing and whether they offer out-of-network benefits or require referrals.
Health Maintenance Organizations (HMOs)
• Closed Network: You must use in-network doctors, hospitals, and other providers.
• Referrals Required: You must choose a primary care physician (PCP) from the HMO’s network and receive a referral before using other doctors in the network.
• Limited Out-of-Network Benefits: Except in specific circumstances (such as an emergency), an HMO will not cover services provided by out-of-network providers.
• Cost Sharing: You pay designated copays for covered services. Some plans require you to meet a deductible before they start paying for services. Typically, HMOs do not require you to pay coinsurance, which can make it easier for you to estimate your annual health care expenditures.
Preferred Provider Organizations (PPOs)
• Open Network: You may use in-network and out-of-network doctors, hospitals, and other providers.
• Referrals Usually Not Required: Most PPOs permit you to visit any doctor in the network without a referral.
• Out-of-Network Benefits: PPOs provide benefits when you see an out-of-network provider. However, you will be responsible for an out-of-network deductible, a higher coinsurance rate, and any remaining balance charged by the healthcare provider.
• Cost Sharing: When you access the PPO’s network, you may pay a copay or coinsurance for covered services. Some plans require you to meet a deductible before they start paying for services.
Exclusive Provider Organizations (EPOs)
• Closed Network: You must use in-network doctors, hospitals, and other providers.
• Referrals Sometimes Required: Some EPOs permit you to see any doctor in the network without a referral, others require a referral. Verify referral requirements with the EPO before making an appointment.
• Limited Out-of-Network Benefits: Except in specific circumstances (such as an emergency), an EPO will not cover services provided by out-of-network providers.
• Cost Sharing: When you access the EPO’s network, you may pay a copay or coinsurance for covered services. Many plans require you to meet a deductible before they start paying for services.
High Deductible Health Plans (“HDHP”), also known as consumer-directed health plans, require you to meet a deductible of at least $1,300 before they start paying for any health care services (other than a few preventative health care services). However, many HDHPs have much higher deductibles—sometimes as much as $6,850 for an individual and $13,700 for a family. HDHPs may be an appropriate choice for some consumers, but not for those who are regular health care users, those who cannot afford to pay health care costs out-of-pocket, or those who want to limit their financial exposure.
Who might benefit from an HDHP?
HDHPs may be a good choice for consumers in good health who have the financial resources to create a health care savings nest egg. If you have an HDHP, federal law allows you to contribute untaxed dollars to a health savings account (“HSA”) to pay for certain medical expenses. In 2016, you can contribute up to $3,350 for an individual and $6,750 for a family to an HSA. Unused funds roll over from year to year, and after you turn 65 you can withdraw money for nonmedical expenses without paying a tax penalty. If you are generally healthy and plan on contributing money each year to build up funds in your HSA, an HDHP might be a good option for you.
Who might not benefit from an HDHP?
If you regularly utilize health care services or if you do not have the resources to pay for unexpected or emergency services out-of-pocket, an HDHP may not be a good option for you.
First, with an HDHP, you must pay for all health care services until you meet your deductible. Keep in mind, this doesn’t just apply to tests and procedures, it also means you will pay the full cost of doctor visits and prescriptions. Some unwary consumers find out too late that an expensive brand name medication with a monthly copay of $40 or $50 actually costs over $1,000 per month when they have to pay for it out-of-pocket. If you decide to switch to an HDHP, make sure you know how much you will pay for medications and doctor visits before you sign your contract.
Second, your health can take an unexpected turn at any point. Even if you are healthy now, you could develop an acute or chronic illness during the plan year. Some people with HDHPs will delay diagnostic tests or health care because they are afraid they can’t afford their medical bills under the plan’s deductible. However, waiting even one or two months to receive health care can lead to pain and even cause irreversible damage to your health. When you compare HDHPs with other plans, make sure you choose a plan you can afford to use when you need it. Your plan is only valuable to you if you can use it!
Finally, accidents and emergencies happen, and a trip to the emergency room can be expensive. If you visit the emergency room with HDHP coverage, you will be responsible for the hospital’s charges until you meet your deductible. That could mean nearly $14,000 out-of-pocket before your plan starts to pay for services if you have a family plan. If you want to limit your financial exposure in case of an accident or emergency, you may want to consider a plan with a lower deductible.
What to consider before purchasing an HDHP:
- How is my health?
- How much do I plan on contributing to my HSA?
- How much do I anticipate I will pay out-of-pocket for doctor visits, medications, tests, and procedures?
- Can I afford to pay for my health care costs until I meet the deductible if I unexpectedly get sick or have an accident?
When you leave your job, you typically have the option of continuing your employer-sponsored health coverage or signing up for an individual policy. Here we offer some tips to help you decide what coverage is best for you. Make sure you pay close attention to the enrollment deadlines. You cannot purchase coverage until the next Open Enrollment period if you miss them.
COBRA Continuation Coverage
COBRA continuation coverage (established by the Consolidated Omnibus Budget Reconciliation Act of 1985) allows you to keep your employer health coverage for eighteen months after you leave employment. If you choose COBRA coverage, you will pay the full cost of your premiums plus a 2% administrative fee. Your employer will send you instructions on how to sign up for coverage. You have 63 days to enroll in COBRA coverage from the date your employer-sponsored coverage ends.
Who Might Benefit from Choosing COBRA Coverage?
Consumers who want plans with richer benefits, consumers in the middle of treatment, and older consumers may benefit from COBRA coverage.
- COBRA coverage often has richer benefits and lower deductibles than individual coverage, which can make it a good value for the cost of the premiums. If you want or need the most comprehensive coverage available, you may want to consider maintaining your employer-sponsored coverage.
- If you are currently undergoing medical treatment, you may find it easier, cheaper, and less stressful to keep the same doctors and continue the cost sharing under your current plan.
- COBRA coverage costs the same regardless of your age. However, insurers increase the cost of individual policies as you get older. If you are older, COBRA coverage may be a better overall value for you than an individual policy.
Individual Health Coverage
Losing your employment-sponsored health coverage triggers a Special Enrollment Period. This means you can shop for an individual policy through an agent, directly from the health insurer, or though the federal health insurance Marketplace. You have 60 days to enroll in individual coverage after your employer-sponsored health coverage ends (45 C.F.R. 155.420).
Who Might Benefit from Choosing an Individual Plan?
Younger, healthier, and lower income consumers may benefit from choosing an individual plan.
- COBRA coverage costs the same regardless of your age. However, insurers increase the cost of individual policies as you get older. If you are young, an individual policy may be much more cost effective than COBRA coverage.
- COBRA coverage can be very expensive and may have benefits you do not want or need if you are healthy. If you do not utilize health care services very often and want to reduce your premium costs, you may want to consider a more economical individual plan over COBRA coverage.
- If you qualify for federal health insurance subsidies, you must purchase an individual plan through the federal health insurance Marketplace to use them.
Remember: Regardless of your age or situation, it never hurts to shop around and consider all of your options before you purchase a plan.
Many consumers shop for a health benefit plan primarily based on the cost of premiums, but many other factors influence the value of a policy. We encourage you to look beyond just the monthly premium and consider variables such as plan benefits, provider availability, cost-sharing, company information, consumer satisfaction, and plan quality when you compare plans. In addition, if you are considering an HMO, you should review OPIC’s HMO publications.
We have developed a list of questions to help you make an informed purchasing decision.
1. Does the plan cover the services I need?
All individual health benefit plans sold in Texas must include certain federal and state mandated benefits. However, plans vary based on the additional benefits they provide. Make sure you understand what each plan you consider covers. Discuss any special health care needs with your agent and carefully review plan documents to find a plan that meets your needs.
2. Are the providers I need (or might need) available near me?
Provider networks differ by plan. Some plans only offer narrow networks with limited provider options, which may make it difficult for you to get the care you need. Review provider directories to learn more about each plan’s network. You will want to consider how far you will need to travel for routine and specialist care. You should also evaluate the availability of critical services like hospitals, emergency rooms, and urgent care centers.
3. Does my provider participate in the plan?
If you prefer to receive care from specific physicians or hospitals, review provider directories to verify the providers you use are in the plan’s network.
4. What are my cost-sharing responsibilities?
In addition to premiums, you will also pay copayments, coinsurance, and deductibles. A copayment is a fixed amount you pay for services such as doctor’s visits and prescriptions. Coinsurance is the percentage of the cost of a service you pay for services like lab tests and imaging. A deductible is the yearly amount you must pay before your plan will contribute to the cost of most covered services. Many plans have changed the way they structure cost-sharing responsibilities over the past several years, and some of these changes can be confusing. Make sure you understand your out-of-pocket costs before signing a contract.
5. How do I research the companies I am considering?
Check the Texas Department of Insurance’s website at https://apps.tdi.state.tx.us/pcci/pcci_search.jsp to verify that the company is licensed, view its financial information, and see the number of complaints against it.
6. Additional Questions to Consider When Selecting an HMO:
HMOs are popular offerings in the individual health benefit plan market. OPIC compiles annual HMO publications to help you compare these products.
a. Are current members satisfied with the plan?
Current member satisfaction is a good indicator of an HMO’s level of service. Comparing Texas HMOs is OPIC’s annual report card on HMO consumer satisfaction. You can review this information to find out how current HMO consumers rate their satisfaction with their doctors, their access to care, and the administration for the HMOs you are considering. Comparing Texas HMOs is available at http://www.opic.texas.gov/health/comparing-texas-hmos
b. Do members receive quality care through the HMO’s network?
The Guide to Texas HMO Quality compares HMO performance on quality of care measures. You can use this publication to evaluate HMOs based on your individual health needs. For example, if you have young children, you may be interested in an HMO with high child immunization rates. If you have diabetes, you may want to consider an HMO with successful metrics related to that disease. You can also consider performance across all measures for a comprehensive picture of an HMO’s quality. The Guide to Texas HMO Quality is available at http://www.opic.texas.gov/health/guide-to-texas-hmo-quality
Checklist for Choosing an Individual Health Benefit Plan:
1. Confirm the plan covers the services you need.
2. Make sure the providers you need (or might need) are available close to you.
3. If you want to keep your doctor, verify that he or she participates in the plan.
4. Understand your cost-sharing responsibilities.
5. Research the companies on TDI’s website.
6. If you are considering an HMO, review OPIC’s publications for member satisfaction and quality of care information.
Answer: November 1, 2016—January 31, 2017 or 60 days after a Qualifying Life Event
Most people know they must have health coverage or pay a fine when they file their federal income tax. However, did you know you can only sign up for qualifying individual coverage a few months every year? Plans available outside of the Open Enrollment and Special Enrollment Periods lack the protections of the Affordable Care Act and do not meet the standards that prevent you from paying a fine with your income tax. Keep the following enrollment periods in mind to make sure you don’t miss out on qualifying coverage.
Annual Open Enrollment
Everyone can buy individual health insurance during the annual Open Enrollment Period: November 1, 2016—January 31, 2017. You can purchase health insurance through an agent, directly from the health insurer, or though the federal health insurance Marketplace (HealthCare.gov or 1-800-318-2596). Keep in mind, if you want to utilize federal subsidies to purchase your coverage, you must buy directly through the federal Marketplace.
Don’t wait until January to purchase or renew your health plan. You must enroll by December 15, 2016 if you want your coverage to start on January 1, 2017. If you purchase coverage between December 16 and January 15, it will begin on February 1, 2017. If you wait until after January 15, your coverage will not begin until March 1, 2017.
Special Enrollment Periods
Special Enrollment Periods (“SEP”) are specific times outside of the annual Open Enrollment Period when you can sign up for health coverage on the individual market. Typically you must experience a qualifying life event to trigger a SEP. You should be prepared to provide proof that the event occurred when you enroll.
The most common qualifying life events include:
- Involuntary loss of minimum essential coverage
- Marriage or divorce
- Birth or adoption
- A permanent move
You have 60 days following a qualifying life event to enroll in a plan. If you miss the SEP window, you must wait until the next annual Open Enrollment Period to apply for coverage.
In 2015, the Texas Legislature passed a number of bills that will directly affect your health insurance benefits.
SB 481. This bill is the most significant change and it affects your rights when you receive a bill from certain hospital providers. SB 481 permits you to request mediation if you receive a bill over $500 from an out-of-network facility-based physician. In practical terms, this means that if you receive a bill for over $500 from an out-of-network physician for an emergency room visit, you can contact the Texas Department of Insurance to mediate the claim.
There are a few important caveats that you should be aware of before you request mediation.
1) The bill must be over $500 after you have met your cost-sharing responsibilities (deductible, copay, and/or coinsurance).
2) The mediation program does not extend to self-funded ERISA plans or indemnity plans since those are governed by federal, not state, law.
In addition to SB 481, you should also be aware of the new laws below and how they affect your benefits:
HB 1621 requires your health benefit plan to continue to cover contested services during a concurrent utilization review. The utilization review agent must notify you of an adverse determination regarding your benefits at least 30 days before your plan stops paying for your services.
HB 1624 requires health benefit plans to display formulary information conspicuously on their website. Formulary information includes the type of prescriptions drugs covered under the pland the price for each drug. Ready access to formulary information can help you better estimate out-of-pocket costs for your prescription drugs. The law also requires insurers to keep their physician directories up to date. This will help you when you are looking for a new doctor in your existing plan and let you know what doctors are available when you are shopping for a new plan.
HB 2813 requires health benefit plans to cover CA 125 tests for the early detection of ovarian cancer. Your doctor can tell you if this test is appropriate for you.
SB 425 requires freestanding emergency medical care facilities to notify you that the facility is a freestanding emergency medical care facility and that it charges rates comparable to a hospital emergency room. It also must notify you that the facility or the provider who sees you may not be an in-network provider. Freestanding emergency medical centers (also known as freestanding ERs) can be much more convenient than a hospital ER in an emergency. However, to avoid the high cost of emergency room care in a non-emergency care situation, plan in advance by locating the nearest in-network urgent care centers.
The amount of your health care costs that you pay out of your own pocket is often referred to as “cost sharing.” This term typically refers to deductibles, copays, coinsurance, and other similar charges. It does not include the cost of your premiums and non-covered services.
Deductible: A deductible is the yearly amount you must pay before your plan will contribute to a covered service. The deductible may not apply to certain services like routine doctor visits. Often you will have an in-network deductible, an out-of-network deductible, and a pharmacy deductible. Your in-network deductible can range between $0 and $6,850 for an individual policy.
Copayment: A copayment is a fixed amount you must pay for a covered service. For example, your plan may require you to pay $25 to see you primary care physician. Plans typically do not count your copays towards your annual deductibles.
Coinsurance: Coinsurance is the percentage of the cost of a service for which you are responsible. For example, your plan may require you to pay 20% of the cost of a service and it will cover the remaining 80%. Typically your plan will have different in- and out-of-network coinsurance levels. For example, your plan may have a 20%/80% in-network coinsurance level, but a 40%/60% out-of-network coinsurance level. Typically, Exclusive Provider Organizations (EPOs) and Health Maintenance Organizations (HMOs) will require you to pay 100% of your out-of-network expenses.
Your health plan will review your coverage for a treatment, service, or prescription either before or after your claim is filed. If your health plan refuses to pay for medically necessary services, treatments, or medications, you have the right to appeal the decision through the plan’s internal appeal process. You must consult your plan documents or contact your plan or employer for details on your plan’s appeal process.
Typically a plan will require you to complete forms or write a letter indicating that you are appealing the decision. You may submit any additional information that you want the insurer to consider. The letter you submit for your appeal does not need to be technical, but you should specify what claim denial you are appealing and why you believe the company should review the denial. Typically you must file your appeal within 180 days (six months) of receiving notice that your claim was denied. Make sure you keep copies of all information related to your claim and the plan’s denial, including information the plan provides to you. This includes Explanation of Benefits (EOB) forms, a copy of any information you send to the company, and notes from any phone conversation you have with your insurer about the appeal.
When you have exhausted your internal appeal rights, you may have the right to have the decision reviewed externally by an independent review organization (IRO). Your health plan must provide an independent review form if it denies payment based on a decision that the treatment is unnecessary, inappropriate, experimental, or investigational. Your health plan must pay for the review and must comply with the IRO’s decision.
The IRO must issue a decision within twenty days for non-emergency treatment and within five days for emergency treatment. The law does not require a plan to provide an IRO for services it does not cover. It also does not require certain types of plans—Medicare, Medicaid, and ERISA plans, for example—to participate in the IRO process.
For more information on IROs, contact TDI’s Health and Workers’ Compensation Network Certification and Quality Assurance Office at 1-866-554-4926 or visit its website at https://www.tdi.state.tx.us/wc/wcnet/
Steps to appeal a health care claim denial:
1. Review your plan documents or contact your plan or employer for details on how to appeal the denial.
2. Submit your appeal within 180 days of receiving notice that your claim was denied.
3. Keep copies of all information related to your claim and the plan’s denial.
4. If the company still denies your claim, request an external review (IRO) of the denial.
Health insurance can be confusing. Here are a few tips to help you understand your new health insurance.
How do I find a network provider?
Your health plan will have a list of in-network providers. This information is also often available online as part of your insurer’s website. If you need to see a specialist, you may need to obtain a referral from your primary care provider before you receive services even if the specialist is in your network. Contact your health plan before you make an appointment to verify the plan’s requirements.
How will I know how much a procedure will cost?
To avoid billing surprises, always price a procedure in advance. For in-network procedures, contact your plan for your out-of-pocket responsibility. For out-of-network procedures, first contact the provider for the procedure price and then contact your plan to verify your financial responsibility.
Typically plans will only pay a percentage of the allowed amount for an out-of-network procedure. This amount is typically lower than the amount the provider charges. When you receive out-of-network care, you must pay your percentage plus any remaining balance charged by the provider.
How do I challenge a denial of benefits?
Your health plan will review any claim for treatment or service. If your plan refuses to pay for medically necessary services, treatments, or medications, you have the right to appeal the decision through the plan’s internal appeals process. Contact your plan for details on the appeal process.
If you have exhausted your internal appeal rights, you may have the right to have the decision reviewed by an independent review organization (IRO). Your health plan must provide an IRO form if it denies payment based on a decision that the treatment is unnecessary, inappropriate, experimental, or investigational.
For more information on IROs, contact the Department of Insurance’s Network Certification and Quality Assurance Office at (866) 554-4926 or visit its website at https://www.tdi.state.tx.us/wc/wcnet/.
What happens if I overpay my provider?
Your provider must refund any overpayments. Contact your provider’s office if you think you have overpaid.
Calculating out-of-pocket costs can be confusing. The two examples below illustrate how deductibles, copays, and coinsurance can translate into out-of-pocket costs for in-network and out-of-network providers. Always make sure you verify your financial responsibility for a procedure with your plan prior to any procedure.
Let’s say your doctor recommends an MRI and you go to an in-network provider for the service. The in-network provider has contracted with your insurer to perform the MRI for $1,000. Your plan applies a $100 copay, a $200 in-network deductible, and 20% coinsurance for in-network providers. You would owe:
$200 for your deductible
+ $100 for your copay
+ $140 for your coinsurance (20% of the cost after the application of your deductible and copay: $200 + $100 = $300. $1000 - $300 = $700. $700 * 20% = $140.)
If you had already met your annual deductible, you would pay $280 out-of-pocket.
$100 for your copay
+ $180 for your coinsurance (20% of the cost after the application of your deductible and copay: $1000 - $100 = $900. $900 * 20% = $180.)
Let's say your doctor recommends an MRI and you go to an out-of-network provider for the service.* The out-of-network provider charges $2,000 for an MRI and your insurer has set an MRI allowable amount of $1,000. Your plan applies a $500 out-of-network deductible, a $100 copay, and 40% coinsurance for out-of-network providers. You would owe:
$500 for your deductible
+ $100 for your copay
+ $160 for your coinsurance (40% of the cost after the application of your deductible and copay: $500 + $100 = $600. $1,000 - $600 = $400. $400 * 40% = $160.)
+$1,000 for the amount beyond the allowed amount ($2,000 - $1,000 = $1,000.)
$ 1,760 out-of-pocket
If you had already met your annual out-of-network deductible, you would owe $1,460 out-of-pocket.
$100 for your copay
+ $360 for your coinsurance (40% of the cost after the application of your deductible and copay: $1000 - $100 = $900. $900 * 40% = $360.)
+$1,000 for the amount beyond the allowed amount ($2,000 - $1,000 = $1,000.)
$ 1,460 out-of-pocket
* For out-of-network procedures, first contact the doctor or hospital to find out the cost of the procedure. Next, contact your insurer to find out what the allowed amount for the procedure is and what percentage you will be responsible for. The allowed amount is the maximum reimbursement your health plan allows for a specific service. You will be responsible for any amount billed over the allowed amount.