Protecting Your Family and Property

In this chapter, you’ll find information on different types of insurance, including homeowners, auto and medical, as well as practical tips on reading policies and shopping for coverage. As you organize your relocation to the San Antonio area, 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 handy copies of previous auto, home and health policies for easy reference when completing new insurance applications—it will save you time and aggravation.

In Texas, the Texas Department of Insurance (TDI) regulates the state’s insurance industry. TDI encourages company competition to make insurance available and affordable. It also helps educate consumers so they can make well-informed insurance decisions as well as provide assistance and information. More information can be found at TDI’s website at www.tdi.texas.gov or by calling (800) 252-3439.

TDI recommends the following tips to assist you with all of your insurance-shopping needs.
  • Get price quotes from several companies. Compare the rates and coverages. TDI publishes auto and homeowners price comparisons that can help you compare sample rates. The price comparisons include annual price estimates for sample policies and information about a company’s complaint record and financial strength.
  • Include independent agents. 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, which are amounts 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.

Insurance companies may sell several types of homeowners policies in Texas, each with a different level of coverage.
  • HO-A policies provide extremely limited actual cash value coverage of your home and its contents. Only the types of damage specifically listed in the policy are covered.
  • HO-A amended policies provide more extensive coverage than the base HO-A policy but less coverage than an HO-B. Coverage provided by these policies may differ by company.
  • HO-B policies provide replacement cost coverage for most types of damage, except those specifically excluded in the policy.
  • HO-C policies provide the most extensive coverage, but they are more expensive than other types of policies.

Generally, HO-B policies provide the most coverage for the price, but some companies do not offer them. Read your policy carefully to know exactly what coverages are included. If a company offers you a policy with less coverage than you’d like, ask if other policy forms are available. You also may be able to buy additional coverage by adding endorsements to the base policy.

Consumers can compare rates among homeowners insurance companies by going to www.tdi.texas.gov/insurance/index.html to view rate comparisons. You’ll get a list of all the companies in TDI’s database and their sample rate estimates. You then can select up to three companies to view detailed comparisons of rate and policy information.

— Make Sure Your Coverage Fits Your Needs
TDI advises that you have enough coverage to avoid a major financial loss if your home is badly damaged or destroyed. This means keeping a realistic dollar amount of coverage on your house. Also, it means that you should insure your home’s “replacement cost,” not its market value. The market value may be higher or lower than the cost to rebuild your home. If you have replacement-cost coverage and your house is destroyed, you can rebuild your home on the same lot at current local construction costs.

HO-A policies do not provide replacement-cost coverage, but you may be able to add it with an endorsement for an additional premium. Companies use various methods to determine the estimated replacement cost of your home. Be prepared to answer questions about your home’s square footage, number of bedrooms and number of bathrooms. Inform the agent of any custom features that are part of the house.

When calculating your home’s replacement cost, deduct the value of the land, foundations that are below ground and other items, such as landscaping and lawn sprinkler systems. Construction costs change, so it’s wise to update your coverage amounts annually.

Household contents automatically are covered only for their “actual cash value.” Actual cash value is the replacement-cost minus depreciation. You can buy replacement-cost coverage for your possessions as an endorsement. Homeowners policies offer very limited coverage for valuables like jewelry, furs, cash and stamp and coin collections. You can buy separate endorsements to increase your coverage.

According to TDI, a homeowners policy includes five different types of insurance coverage:
  1. Dwelling. This pays for damage to your house and any outbuildings, such as detached garages and storage sheds.
  2. Personal property. The policy pays when household items, including furniture, clothing and appliances, are damaged, stolen or destroyed.
  3. Liability. This protects you against financial loss if you are found legally responsible for someone else’s injury or property damage. A homeowners policy automatically provides $25,000 in coverage. You can buy up to $1 million in coverage for an extra premium.
  4. Medical payments. This covers payment of medical bills for people injured while on your property. It also pays for some injuries that happen away from your home, such as your dog biting someone. A basic homeowners policy pays $500 in medical bills. You can pay extra and get up to $5,000 in medical-payments coverage.
  5. Loss of use. This will cover living expenses if your home is too damaged to live in during repairs. Typically, a policy pays up to 20 percent of the amount for which your house is insured.

— Factors That Affect Your Premium
Your premium will be based on several factors. According to TDI, these include the following:
  • Where you live
  • Level of fire protection available in the area
  • Construction type of your home (brick or frame)
  • Type of policy you purchase
  • Amount of coverage you buy

— Lowering Your Premium by Increasing Your Deductible
Texas homeowners policies generally carry a basic deductible of 1 percent ($1,000 on $100,000 of coverage) of the insured value of the dwelling. Deductibles are available as high as 5 percent and as low as $100, although not all companies offer deductibles that low. If you raise your deductible, you’ll have to pay more out of pocket for repairs and replacement costs before your insurance company will begin to pay.

If you’re new to the San Antonio area, it’s important to know about potential natural disasters that may arise. Depending on where you are interested in living in the area, do some research and ask questions of your real estate agent and others to learn how the neighborhoods you’re considering fared during any past extreme weather.

San Antonio isn’t known for extreme natural disasters very often, but once natural disasters strike, it’s too late to get insured so it’s a decision that has to be made with planning in mind. If being protected against these natural disasters is important to you, learn more from the information following.

— Windstorm Insurance
The Texas Windstorm Insurance Association (TWIA) was established by legislative mandate to provide wind and hail insurance for Texas Gulf Coast property owners in the event of catastrophic loss. It provides “basic” coverage unavailable in traditional markets for consumers who might otherwise be left uninsured. TWIA is the state’s insurer of last resort for wind and hail coverage in the 14 coastal counties and parts of Harris County (east of Highway 146).

Although San Antonio is not located in the Gulf Coast region, residents still can obtain windstorm insurance to protect their homes from tornados that can enter the area. Similar to other insurance carriers, TWIA has a written contract that specifies the extent and restrictions of the insurance coverage it provides. Visit the TDI Windstorm Inspection Program website at www.tdi.texas.gov/wind/index.html for more information.

— Flood Insurance
The city of San Antonio participates in the National Flood Insurance Program (NFIP), a federal program that enables residents and business owners in participating communities to purchase insurance protection against losses to structures and contents from flooding. This is important because protection against losses from flood damage is not typically included in basic homeowners insurance coverage.

With all the waterways that traverse the San Antonio region, the city government advises that all residents should obtain flood insurance for their homes and businesses. The cost of flood-insurance coverage is generally very low compared to the potential cost of damage that can be caused by flooding. Contact your property insurance agent for more information on how to obtain flood-insurance coverage.

If you are planning to live in Bexar County, find out if your property is affected by calling your insurance agent or looking your area up at the Bexar Regional Watershed Management website at www.bexarfloodfacts.org.

— Earthquake Insurance
Earthquakes are rare in Texas, but if you want the coverage, you can pay for it with a separate policy that won’t be expensive.

— Extra Coverage (Endorsements)
You can pay extra for more coverage to cover additional items that are not in your policy. This can include items, such as special art collections, computer equipment, jewelry or camera equipment.

— Personal Umbrella Liability Insurance
This is designed to protect you against a catastrophic lawsuit or judgment. It provides expanded coverage and increases the amount of your liability protection beyond the basic coverage provided under your homeowners policy. To decide whether it’s necessary, discuss it with your agent or insurance company.

While you may have a flawless driving record, it only takes the action of one careless driver to cause you bodily injury and also destroy your automobile. It’s also the law in Texas that a person may not operate a motor vehicle in this state unless financial responsibility is established for that vehicle, which means auto insurance is necessary. Learn more in this section as well as auto insurance basics, the eight basic types of coverage available, insuring teen drivers and what to do when an accident occurs.

— 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, which 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 can 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 Texas.

You can learn more about a company, including its license status, complaint history and financial rating from an independent rating organization, by calling the Texas Department of Insurance Consumer Help Line at (800) 252-3439 or by visiting www.tdi.texas.gov.

— Auto Insurance 101
Auto insurance pays for damages, injuries and other losses specifically covered by your policy. Coverages can vary by policy and company. Read your policy carefully to know exactly what it covers. Pay special attention to the exclusions section, which lists the things your policy doesn’t cover. The front page of your policy is called the declarations, or “deck,” page. It contains useful information, such as the exact name of your insurance company, your policy number and the amount of each of your coverages and deductibles.

Texas law requires people who drive in Texas to be able to pay for the automobile accidents they cause. Most drivers do this by buying automobile liability insurance. Liability insurance pays to repair or replace the other driver’s car and pays other people’s medical expenses. It does not pay to repair or replace your car or for your injuries. You must have at least the minimum amount of liability coverage required by the state’s financial-responsibility law.

The current minimum liability limits increased in January 2012, to $30,000 for each injured person, up to a total of $60,000 per accident and $25,000 for property damage per accident. This basic coverage is called 30/60/25 coverage.

Because of car prices and the high cost of medical care, the minimum amounts might not be enough if you cause an accident. If your liability limits are too low to pay for all of the other driver’s costs, the driver may sue you to collect the difference. To protect yourself financially, consider buying more than the basic limits.

— Proof of Financial Responsibility
When you buy an auto insurance policy, your insurance company will send you a proof-of-insurance card. You will have to show proof of insurance in the following instances:
  • You are asked for it by a law enforcement officer.
  • You have an accident.
  • You register your car or renew its registration.
  • You obtain or renew your driver’s license.
  • You get your car inspected.

There are severe legal penalties for violating the state’s financial responsibility laws. A first conviction will result in a fine between $175 and $350. Subsequent convictions could result in fines of $350 to $1,000, suspension of your driver’s license and impoundment of your automobile.

— Know Your Rights
Texas has an automobile insurance Consumer Bill of Rights. Your company must send you a copy with your policy. Take time to read it to fully understand your rights under Texas law.

The Texas Personal Automobile Insurance Policy offers eight types of coverage. Basic liability coverage meets the state’s financial responsibility laws. If you still owe money on your car, your lender also will require you to have collision and comprehensive coverage.

Auto insurers may offer alternative policies if approved in advance by TDI. Read your policy carefully, as your coverages and policy terms could differ from the following descriptions of the eight types of coverage available.

— Liability Coverage
Basic liability coverage meets the state’s financial responsibility requirement. It pays other people’s expenses for accidents caused by drivers covered by your policy, up to your policy’s dollar limits. These may include other people’s medical and funeral costs, lost wages and compensation for pain and suffering, car repair or replacement costs, auto rental while the other driver’s car is being repaired and punitive damages awarded by a court. Liability insurance also pays your attorney fees if someone sues you because of the accident and bail up to $250 if you are arrested. Liability covers you and your family members, which include anyone living in your home related to you by blood, marriage or adoption, including your spouse, children, in-laws, adopted children, wards and foster children. Other people driving your car with your permission and family members attending school away from home; spouses living elsewhere during a martial separation also might be covered. You and your family members might be covered when driving someone else’s automobile—including a rental car—but not a car that you don’t own but have regular access to, such as a company car. Note: Some policies won’t cover other people, including family members, unless they’re specifically named in the policy. Your policy’s declaration page should list the names of all of the people covered by the policy.

— Medical-Payments Coverage
Automobile accidents often result in one or more persons being injured in some way. It is important to be covered properly if this occurs. This coverage pays medical and funeral bills resulting from accidents, including those in which the other person is a pedestrian or bicyclist, and covers you, your family members and passengers in your car, regardless of who caused the accident.

— Personal Injury Protection (PIP) Coverage
An insurance company must offer you $2,500 in PIP, but you can buy more. If you don’t want PIP, you must reject it in writing. PIP pays for the same things as medical-payments coverage, plus 80 percent of lost income and the cost of hiring a caregiver for an injured person. It covers you, your family members and passengers in your car, regardless of who caused the accident. An insurance company must offer you $2,500 in PIP, but you can buy more. If you don’t want PIP, you must reject it in writing.

— Uninsured/Underinsured Motorist (UM/UIM) Coverage
Insurers must offer UM/UIM coverage. If you decline coverage, you must do so in writing. UM/UIM pays your expenses from an accident caused by an uninsured motorist or a motorist who did not have enough insurance to cover your bills, up to your policy’s dollar limits. It also pays for accidents caused by a hit-and-run driver if you promptly reported the accident to police and covers You, your family members, passengers in your car, and others driving your car with your permission. Following are the two kinds of UM/UIM coverage you can get:
  • Bodily injury UM/UIM pays without deductibles for medical bills, lost wages, pain and suffering, disfigurement and permanent or partial disability.
  • Property damage UM/UIM pays for auto repairs, a rental car and damage to items in your car. There is an automatic $250 deductible, which means you must pay the first $250 of the repairs yourself.

— Collision Coverage
Damages to cars can be extensive and costly when involved in an accident. Collision coverage pays for the cost of repairing or replacing your car after an accident. Payment is limited to your car’s actual cash value, minus your deductible. Actual cash value is the market value of a car like yours without damages. It will cover you, your family members, passengers in your car and others driving your car with your permission.

— Comprehensive Coverage
Sometimes there is physical damage done to your car caused by factors other than collision. If you still owe money on your car, your lender will require you to have collision and comprehensive coverage. It pays the cost of replacing or repairing your car if it is stolen or damaged by fire, vandalism, hail or a cause other than a collision. Comprehensive coverage also pays for a rental car or other temporary transportation if your car is stolen. Your policy won’t pay for an auto theft unless you report it to police. Payment is limited to your car’s actual cash value, minus your deductible.

— Towing and Labor Coverage
If your car needs to be towed or repaired at a remote location, the service can be costly so this is good coverage to have. It pays for the towing charges when your car can’t be driven. It also pays labor charges, such as changing a tire at the location where your car became immobile.

— Rental Reimbursement Coverage
If you need to rent a car while yours is being repaired, having this coverage can offset the expense because it pays a set daily amount for a rental car if your car is stolen or is being repaired because of damage covered by your policy.

— Coverage for Stereo Equipment
Your policy won’t pay for CDs, tapes, cell phones, citizen band radios or stereo equipment not permanently installed in your car. However, you can buy endorsements to your policy that provide separate coverage for these items for an additional premium.

— Coverage of New or Additional Automobiles
If you buy another car, your policy might automatically cover it with certain limitations. Read your policy to know whether it automatically covers an additional or replacement car. In general, an additional car usually has the same coverage as the car on your policy with the broadest coverage. For example, if you have two cars—one with liability coverage only and one with liability, collision and comprehensive coverages—and you buy a third car, the third car will automatically have liability, collision and comprehensive coverage. A replacement car usually has the same coverage as the car it replaced. For example, if you trade in an older car that only had liability coverage, the new car automatically will have only liability coverage. Be sure to tell your insurance company as soon as possible that you have added or replaced a car and which coverages you want. You could lose coverage on an additional or replacement car if you wait longer than the number of days specified in your policy to notify your insurance company.

— 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 already may 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. The Texas Automobile Rental Liability Policy provides liability insurance for renters who do not have a personal auto policy. If you don’t own a car, but borrow or rent cars often, you can buy a nonowner liability policy. A nonowner 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.

Young drivers must comply with the state’s financial responsibility laws. Parents can usually add their children to their auto policy to satisfy the financial responsibility requirements. Adding a young driver to a parents’ policy can be expensive, but it’s cheaper than buying a separate auto policy.

Some policies require all drivers to be named on the policy for coverage to apply. Therefore, it’s important that you list all family members on the policy as soon as they reach driving age. If you don’t have all of the drivers in your family listed on your policy and the company learns about them later—because of an accident claim, for instance—the company will bill you for the extra premium you should have paid and could deny your claim and coverage.

If you have children attending school away from home, tell your insurance company. Because companies base rates on where a car is usually located, it might need to adjust your premium. If the school is in another state, check on the financial responsibility laws in that state to make sure you have the appropriate coverages.

Generally, if a teenager is the principal driver of a particular automobile, the company will base the teen’s rate on that car. Otherwise, the company will assign the teenage driver to the car (usually the most expensive) in your household that produces the highest rate.

— Removing Your Children from Your Policy
You may want to remove your children from your policy when they no longer live with you. You’ll probably have to prove to the insurance company that your child has moved. You can use documents like a driver’s license, lease agreement or utility receipts to show that your child has a separate address.

It’s probably not a good idea to remove children from your policy if they are attending school away from home. It’s risky to drop coverage if your teenager might occasionally drive at school or when home on visits. Many insurance companies will require you to keep students on your policy even if you would like to remove them.

You can sometimes remove a teenage driver from your policy by buying a nonowner policy; however, this usually isn’t a good idea. A nonowner policy only provides liability coverage for someone driving a vehicle that he or she doesn’t own. If your teenager has an accident while driving your car, neither your policy nor the nonowner policy will pay to repair or replace your car. The rates for a nonowner policy likely will cost more than leaving the teen on your policy.

— Saving Money on Insurance for Young Drivers
Some insurance companies give a discount for teenagers who complete a Department of Public Safety (DPS)–approved driver education course. Drivers taught by their parents also may be eligible for the discount if the parent used a DPS-approved course. Some companies offer discounts to young drivers who make good grades in school or who belong to certain youth groups. Ask your agent about discounts.

If you were in an accident caused by another driver, the other driver’s insurance company should pay the following costs (up to the policy’s limits):
  • Repair or replacement of your car
  • Car rental while your automobile is being repaired
  • Your medical and hospital bills
  • Wages lost because of an injury
  • Compensation for pain and suffering if anyone is hurt

If the other driver’s insurance won’t cover all your medical bills, file a claim for the difference against your Personal Injury Protection (PIP) coverage, if you have it. For amounts beyond that, you can claim against your uninsured/underinsured motorists (UM/UIM) coverage or your health insurance policy.

If the other driver’s policy won’t cover all of your auto repairs, file a claim against your collision or UM/UIM coverage for the difference (minus your deductible) between the damage to your car and what the other driver’s policy will pay.

The other driver’s insurance company may ask you to sign a release to settle your claim and forgo future claims related to the accident. Don’t sign a release until you are satisfied with the total settlement. Get a letter from your doctor estimating the cost and length of your future medical treatment. You might want to consult an attorney before accepting a settlement. Under Texas law, you have two years after an accident to either settle your claim or file a lawsuit.

Texas law prohibits insurance companies from delaying payment of a claim to pressure you to sign a release. If you believe an insurance company is delaying payment to pressure you, file a complaint with the Texas Department of Insurance (www.tdi.texas.gov).

If the other driver denies fault, his or her insurance company may refuse to pay the claim. Independent witnesses could make a difference in getting the company to pay. It’s important to get names, addresses and telephone numbers of any witnesses to the accident. Make sure the insurance company knows about the witnesses. If the company continues to refuse to pay the claim, you can file a claim against your own insurance or you may have to go to court to resolve the issue.

Before filing a claim with your company, ask your agent or your company’s underwriting department how a claim might affect your rates on renewal. A company cannot refuse to renew your policy solely because you had one accident in a 12-month period that was not your fault. However, if the accident affected your DPS driving record, your company may consider it in determining your rates regardless of whether you made a claim on the accident.

The health care and biosciences industry in San Antonio is a major economic force in the community, responsible for employing one of every seven San Antonio employees, representing an annual payroll of $4.75 billion in 2007. It’s also the center of health care for South Texas, where residents will find an abundance of choices. 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. Following are a few resources in the San Antonio/Bexar County area:
  • The Bexar County Medical Society (BCMS) was the first county medical society formed in the state of Texas in 1853. The society represents more than 4,000 physicians in Bexar and contiguous counties and is the eighth-largest county medical association in the nation. You can find a doctor in Bexar County by visiting www.bcms.org/find_doctor.htm.
  • DoctorFinder by the American Medical Association (AMA) 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, education history and other helpful information. Visit www.ama-assn.org/aps/amahg.htm.
  • Texas Medical Association provides information on Texas Medical Association members only. Call (800) 880-1300 or visit www.texmed.org.
  • State of Texas Medical Board can help you find public information about a medical doctor, physician assistant, acupuncturist or surgical assistant licensed in Texas. Information available for consumers includes name, license number, licensure status, disciplinary status, honors and awards and malpractice history. The Enforcement Division receives and evaluates complaints on physicians, physician assistants and acupuncturists. Call (800) 248-4062 or visit www.tmb.state.tx.us.
  • American Board of Medical Specialties helps when you are searching for a physician to 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.
  • Also refer to the Health & Wellness chapter of this guide for other Physician Referral Services.
  • Family, friends and coworkers also are a good resource for finding a physician. Ask what people like best and least about their doctors.

— 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 also important. Also make sure your carrier is licensed by the Texas Department of Insurance (TDI). Guaranty associations pay the claims of licensed carriers that become insolvent. If your company isn’t licensed, your claims could go unpaid. You can learn a company’s financial rating from an independent rating organization, its complaints history and its license status by calling TDI’s Consumer Help Line or by viewing company profiles at www.tdi.texas.gov.

Ask your friends, family and physicians for health plan recommendations. Be sure to ask these questions before buying a health plan:
  • Will the plan allow visiting a 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 shopping for coverage, visit www.texashealthoptions.com to learn about your options and to help you locate agents and companies selling insurance in your area.

Today in the United States, it is essential for everyone to have health insurance and pay into the system. Uninsured people seeking free services ultimately put a bigger strain on the resources of the government. If everyone pays in, even a minimum amount, more funds become available for those who truly need them. Many people receive health-care coverage as a condition of their membership in a group, such as a place of employment, professional association or other umbrella organization that offers coverage. Others not associated with such groups must buy individual health coverage directly from an agent or insurer. Health-care costs are expensive, and an insurance plan will pay for most and sometimes all of the treatment costs for your illnesses and injuries.

What any particular plan provides—as far as benefits, access to care and out-of-pocket expenses—varies depending on the type of plan and how and where you got it. Generally plans fall under one of two categories: fee-for-service or managed care. The following outlines the basics of these plans and what you can expect from them.

— Fee-for-Service Health Plans
Having a fee-for-service plan means you can seek treatment from any doctor or provider as well as any specialists without requiring a referral. Sold by traditional insurance companies, fee-for-service plans sometimes are called to as “indemnity plans.” For medical conditions the policy covers, this type of plan generally pays for most, but not all, of the costs of treatment.

On fee-for-service plans, sometimes the insured must pay the bill at the time of the treatment then file a reimbursement claim accompanied by appropriate receipts and records with the insurance company. Other times, the provider bills the insurance company first for its share of the health costs and charges only the supplementary amount to the insured patient. As required by Texas law, insurance providers must be prompt in repaying filed claims, but “prompt” can mean several weeks or more depending on the nature of the claim.

If you have a fee-for-service plan, you will pay the following:
  • Premiums are fees paid on a cyclical basis (e.g., semimonthly, monthly, quarterly) that go into the system, and this enables you to receive coverage when you need it. Premiums for plans obtained through an employer likely are deducted automatically from your paycheck. The benefit of insurance through an employer is that many employers contribute a percentage or all of the premium as an employment perk, but law does not require them to do so.
  • Deductibles are the maximum out-of-pocket amount you pay before the insurance provider begins to pay, and your progress toward meeting it resets at the beginning of each plan year (may differ from the calendar year). The deductible varies depending on the plan’s stipulations and often the preference of the insured; however, in general, the deductible functions inversely with premium costs. If you generally are healthy and will not use the insurance often, choose a higher deductible because it means paying a lower premium every cycle. However, if you have a serious illness or chronic medical needs requiring extensive treatment, a lower deductible (with a higher premium) means the insurance will begin to pay sooner. With family plans, although some assign each person a separate deductible, others have one deductible that applies to the entire family.
  • Coinsurance comes into effect after you meet the deductible amount from out-of-pocket expenses. After that point, you pay only a percentage of the remaining costs on covered health services for the plan period while the insurance company pays the rest. The amount of coinsurance in your policy also varies across plans and relates inversely to the amount you pay in premiums. In Texas, law requires plans to pay at least 50 percent of the coinsurance costs, but some pay as much as 70 or 80 percent of the cost, leaving you to pay only the balance.

Most fee-for-service plans have a “lifetime maximum,” which means they only pay up to a certain amount, such as $1 million, toward your total lifetime medical expenses or for certain medical conditions.

— Managed-Care Health Plans
Managed-care plans contract with networks of doctors, hospitals and other health-care providers to provide health services to those under the plan. Some of these plans expressly require the use of network providers for all routine care with exceptions for emergencies. Others will pay for care from any provider, but they offer financial incentives or discounts for using in-network doctors and hospitals.

Compared to fee-for-service, a managed-care plan provides increased affordability for comparable levels of coverage but reduces flexibility in choosing health-care providers. Managed-care networks allow in-network providers to charge lower rates because they have established a built-in clientele for their services. Managed-care plans also control costs by focusing more on preventive care to try to stave off more serious medical conditions that require costly treatments.

In addition, managed-care plans pay only for services considered “medically necessary,” and if they cover prescription drugs, there may be a formulary, or list, that specifies the medications it covers.

With so many options and kinds of managed-care plans, it can be confusing. In general, they can be separated into three basic types, each with a different level of provider choice:
  1. Health maintenance organizations (HMOs) require members to get health care only from providers within the network. Exceptions include medical emergencies or necessary services not otherwise available in the network. When signing up for an HMO, you choose from a list of in-network doctors a primary-care physician who then oversees all of your medical care and provides specialist referrals. Often HMOs pay these primary-care doctors a set amount every month for each member on their list regardless of the covered services performed.
  2. Point-of-service (POS) usually is offered as an add-on to an HMO contract for an additional fee. It allows HMO members to use providers outside the HMO network without seeking a referral; however, it costs more to receive these services. Care for certain medical conditions may qualify for exclusion from this extra fee.
  3. Preferred provider organization (PPO) plans allow members to seek treatment from any provider, but using a provider in the PPO’s network costs less out of pocket. Notably, PPO plans do not require members to select a primary-care physician to oversee general medical care.

With any managed-care plan, members are expected to pay premiums and deductibles just like with a fee-for-service plan. Coinsurance with managed-care plans applies only to POS and PPO plans for both in- and out-of-network care after the deductible is met. The main difference found with managed-care plans is the copayment. Copayments are small amounts the insured pays out-of-pocket with each doctor’s visit, prescription fulfillment or other covered health service. Similar to deductibles and coinsurance, most managed-care plans have a maximum amount an individual must pay within the plan period (generally a year), beyond which, the plan pays for 100 percent of the cost.

Rules for HMOs
Several nationwide safeguards and rules are in place that govern the practices of HMOs for the benefit of all parties involved:
  • HMOs must have in place a procedure for members to submit complaints, for those complaints to be resolved and for members to appeal decisions that leave them unsatisfied with the resolution.
  • HMOs cannot cancel services for, or retaliate against, any involved party (i.e., group contract holder, doctor or patient) who files a complaint or appeals an HMO’s decisions.
  • HMOs may not prevent doctors from talking to members about their medical condition, treatment options and terms of the health-care plan, including how to appeal a decision.
  • HMOs may not provide financial rewards or incentives to doctors for withholding necessary care.

Texas law provides additional protections, requiring HMOs to do the following:
  • HMOs must have adequate personnel and facilities available within a certain mileage from your home, residence or workplace.
  • HMOs must allow referrals to out-of-network providers for medically necessary covered services not available in the network.
  • Under certain circumstances, HMOs must allow members with chronic, disabling or life-threatening illnesses to list a specialist as their primary-care physician.
  • HMOs must allow members to continue seeing providers that leave the network while the patient is under their care for a period of time under special circumstances, such as terminal illness, disability, life-threatening condition or pregnancy if the provider agrees to continue with the HMO-contracted rate.
  • HMOs must pay for emergency care that someone with an “average knowledge of medicine and health” would consider in serious need of immediate medical attention until such a time that the patient’s condition is stabilized enough for them to be moved to the care of a network facility and physician.


— Group Health Plans
The majority of people with health coverage get it through employer-sponsored group plans from their own or their spouse’s employer as part of the employee-benefits package. Although employers are not bound by law to offer health coverage, those that do often contribute toward plan premiums for their employees—some carriers require employers to pay 50 percent or more—but, again, they are not required by law to do so. If your employer does not offer health coverage or it is not adequate for your needs, group plans also can be obtained through various trade unions, professional associations and other civic and social organizations.

Laws that govern group plans differ at the state and federal levels and depending on the size and nature of the group. In Texas, large employers must include certain state-mandated benefits in their group plans from which small employers may be exempt because of special provisions in the state law.

The most common types of group health plans include the following:
  • Small-Employer Plans. Businesses with 2–50 eligible employees—those working full-time or at least 30 hours per week without another source for health benefits—are considered “small employers.” Small employers that offer a plan must make it available equally to all eligible employees. Texas state law protects small employers with a 15-percent cap on annual rate increases on health plans, and if a carrier discontinues a small employer’s plan for any reason, it must accept that group into another plan it offers regardless of enrollment requirements.
  • Large-Employer or Large-Group Plans. Businesses that do not meet the small-employer requirements and are not self-funded by other groups, such as a churches, trade unions and professional associations, can offer a large-employer plan. Large employers can choose to offer a variety of plan options, such as PPO and/or HMO, but if a large employer offers HMO only, by law they must offer the POS addendum option. Large employers also have the option to offer class coverage, which provides benefits only to specific group of employees, such as executives, but not every employee; or they can offer different tiers of benefits to different employee classes. Within a class, however, benefits must be offered equally to all. Furthermore, employers cannot use health status as a reason not to offer coverage to a particular group and cannot exclude any employee from plan membership available to equivalent coworkers for any health-related reasons.
  • Self-Funded Plans. Most health plans offered by very large employers (more than 1,000 eligible employees) are self-funded plans, which are governed by the federal Employee Retirement Income Security Act (ERISA) and regulated by the U.S. Department of Labor under just a few federal requirements. The ERISA law enables companies with employees based in multiple states to be insured under the same plan without having to meet each state’s insurance laws. Employers choosing this option directly pay the cost of their employees’ health care rather than going through an HMO or insurance company. Self-funded plans generally provide comprehensive coverage and sometimes more extensive coverage than other plans. Self-funded plans have their own complaints and dispute resolution procedures, and unresolved issues can be directed to the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) at (866) 444-3272 or www.dol.gov/ebsa/.

Rights in a Group Plan
When issuing an employer health plan, a carrier can use health factors to determine the plan’s premium rates, but it cannot use those factors as a basis for canceling or refusing to renew the plan. In determining those rates, a carrier must accept or reject the group as a whole and cannot deny coverage or charge different rates to certain employees in a particular class or group. Large employers establish eligibility criteria for their own employee enrollment, but as previously stated these cannot be based on health factors and must apply to an entire group.

Carriers are required to give new employees at least 31 days from their hire date to enroll in the company’s group plan as well as provide an annual 31-day “open-enrollment period” so existing employees can join the plan. Special enrollment periods exist for employees experiencing life-changing events, such as pregnancy and childbirth, marriage or divorce or a court-ordered mandate for medical child support.

Premium increases must be conveyed to employers at least 60 days before it takes effect, and plans to discontinue coverage for an employer group must be made known at least 90 days in advance. With a discontinuation, the carrier must offer employers the option to purchase another employer-sponsored health coverage it offers.

— Individual Health Plans
An individual health plan bought directly from an insurance company or HMO can be a good option if you’re self-employed or your company does not offer one. It can cover an individual or can include a spouse and dependents as well. In general, individual plans cost more and often cover fewer conditions than group plans, which offer lower rates because the risk of claims is spread over more people.

Following are common types of coverage available for an individual:
  • HMO plans pay for covered health services from in-network providers or others authorized through prior referrals.
  • Major-medical policies may be offered as PPO plans and cover hospital stays and physician services in and out of the hospital.
  • Hospital-surgical policies only cover expenses directly related to hospital and surgical services, not everyday preventive care.
  • Hospital-indemnity policies pay up to a maximum fixed amount each day during a hospital stay.
  • Specified or dread-disease policies most often are offered as an extension of other individual coverage and cover only specific conditions, such as cancer or AIDS, detailed in the particular policy.
  • Short-term policies last a specified length of time, not to exceed 12 months. This mostly is meant for people who lose coverage but expect to gain it back within a reasonable amount of time.

Rights in an Individual Plan
Carriers can evaluate your medical history and other health factors when offering individual plans and can deny your application based on health factors or offer a plan with an “exclusionary rider” that eliminates benefits for certain conditions.

Although other types of individual plans may cost less, generally it’s best to buy a comprehensive HMO or major-medical policy, which usually provides more benefits and often allows you to add benefits as needed.

Health plans vary on how they address dependent coverage, but as a general rule, children and grandchildren are eligible for dependent health-care coverage until their 26th birthday. Exceptions exist for children with mental or physical disabilities who cannot support themselves financially; they may be covered indefinitely, but evidence of the disability may be required. Policies must provide automatic coverage for newborn children for the first 31 days, after which the insured parent must notify the carrier about continuing coverage.

Self-funded plans may offer dependent coverage, but they are not required to do so by state law except when the enrolled parent is ordered by a court to provide medical child support. For this situation, state law requires plans of all kinds to provide comparable coverage for a dependent even if the child does not live with the parent or within the service area.

Large-employer plans with dependent coverage provide coverage for children up to age 26, even if they are away at college; however, an HMO plan can require dependent students to return to the plan’s service area to receive health-care services except in cases of emergency care and authorized referrals.

— Birthday Rule
If spouses are covered by separate health plans and both cover their shared dependents, 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 January 5, 1977, would pay for a child’s health care before the plan of the other parent whose birthday is March 1, 1976. However, if the first parent’s plan reaches its benefits maximum, the second plan will take effect. In the event of a divorce, a court will determine which parent’s plan is a dependent’s primary coverage.

Clearly benefits vary from one plan to another, but all of them are classified as “state-mandated plans” or “consumer-choice plans.” A state-mandated plan provides required minimum features and coverages, but it may not be the cheapest option. For that reason, consumer-choice plans, also known as “standard plans,” are allowed by Texas law to make health coverage more affordable, but they may not include all of the state-mandated benefits. These plans are required, however, to provide a disclosure statement and a list describing any benefits not covered. Although called standard plans, consumer-choice plans do not provided “standardized” coverage because each carrier’s plan may be different and one carrier may have several different options within this category.

Beyond the benefits required by state law, health plans must follow federal laws in regard to offering coverage for maternity and newborn and mastectomy services.

— Maternity and Newborn Coverage
No carrier may deny benefits for services related to a pregnancy on the grounds that it is a “pre-existing condition.” A group health plan with more than 15 employees must provide for minimum hospital stays for the delivering mother. For a natural birth or “uncomplicated vaginal delivery,” the insured is guaranteed a minimum of 48 hours. The minimum stay for an uncomplicated cesarean birth is 96 hours.

In most cases, management of a difficult birth is covered by plans with maternity benefits and is not considered a “complication of pregnancy.” Complications that may not be covered include miscarriages or nonelective cesarean births, for which obtaining a “complications of pregnancy” benefit may help if your plan does not have extensive maternity benefits.

A carrier cannot exclude or limit initial coverage for a newborn child because of premature birth, accident, illness or congenital medical conditions, including the need for reconstructive surgery of craniofacial abnormalities on children under 18 who have been covered continually by a health plan. Furthermore, all plans must provide automatic coverag
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