Texas Small Group Health Insurance

What qualifies as a Small Group health plan in Texas? According to the law, the term small group means a business with two to 50 eligible employees. The law provides these small groups added protections such as: a 15 percent annual cap on rate increases relating to health conditions, a guarantee that health insurance carriers cannot discontinue coverage arbitrarily, and that the small group employers can pool their resources to negotiate lower insurance premiums through Group Purchasing Arrangements(GPA's).

Advantages of Small Group Health Insurance:

By law your employer has to pay at least 50% for your "employee only" health insurance premium. Some employers even pay for your spouse and dependents. For persons with major health issues, a group health insurance plan may be their only option for affordable coverage, because they are not eligible for individual health insurance.

Disadvantages of Small Group Health Insurance:

Many self-employed people cannot qualify for group health insurance because you have at least two employees to qualify of a small group plan in Texas. With the cost of group health insurance plans increasing dramatically (from 2000 to 2009, health insurance premiums have increased an average of over 10% per year), many companies have passed more of the cost onto their workers or even dropped health insurance coverage altogether.

What are the rules for small group health insurance in Texas?

Federal law mandates that no matter what pre-existing health conditions small employer group members may have, no small employer or an individual employee can be turned down by an insurance company for group coverage. This requirement is known in the insurance industry as "guaranteed issue." In Texas, the HIPAA law of 1996 says that a small group of 2 to 50 employees must be issued on a guaranteed basis.

In addition, each insurance provider must renew its small employer health plan contracts every year, at the employer's discretion, unless there is non-payment of premium, the employer has committed fraud or intentional misrepresentation, or the employer has not complied with the terms of the health insurance contract.

In Texas, small employer health insurance companies are allowed to review individual group applications medical histories for pre-existing conditions and may decide not to cover certain conditions for a specified period of time. This is known as a pre-existing condition waiting period.

Federal law states that small group health insurance companies may impose no more than a six-month look back and a 12-month exclusionary period for pre-existing conditions if an employee has had no health insurance coverage. Exclusions for pre-existing conditions would include if an employee has had continous coverage of no less than 18 months. If that employee lost his coverage, he or she would have a new health policy in force with 63 days. This is called a Certificate of Credible Coverage. If your employer switches health insurance companies during renewal, the prior health insurance company will issue the Certificate of Credible Coverage with a listing of each employee.

In Texas, the law allows small group health insurance companies to determine their initial premium rates for each company using a process known as medical underwriting. Some states make small group health insurance companies use processes known as modified community rating or community rating to determine their initial rates. When small group plans are medically underwritten, employees are asked to provide health information about themselves and their covered family members when they apply for coverage. When determining rates, insurance companies use the medical information on these applications. Sometimes they will request additional information from an applicant's physician or ask the applicants for clarification.

If a company is unable to obtain information necessary to accurately determine the risk of a particular applicant, it will underwrite more conservatively, meaning that the assumption relative to the missing information will be negative rather than positive.

Is Small Group health Insurance available for a sole proprietor (1 person small group) in Texas?

No, Texas only recognizes businesses with at least 2 employees to be eligible for small group health insurance coverage. Your only options would be to apply for a individual health insurance or apply through your spouse's small group health plan, if available.

Important tips when shopping for a health insurance policy in Texas

1. Make certain you purchase real insurance, NOT a discount or limited benefit plan.You may see advertising that offers health discounts for a low monthly fee. These plans are NOT health insurance and are sold to unsuspecting persons who do not realize what they have bought until they find out they have no real coverage. Avoid at all costs!
2. Avoid most limited benefit plans.
   These plans are usually sold by an agent that only represents one specific company as a cheap alternative to major medical plans. Beware, in most cases you can be exposed to significantly larger out pocket expenses, since these plans rarely offer any maximum out of pocket expense and the benefits are limited to a certain amount for specific illnesses or calendar year.
3. Watch for "association plans".
   They are sold to persons on the basis that you are part of a "group" that can negotiate lower premiums. Their so called group of "self-employed" is little more than a way for a poorly rated company to sell insurance. Some association plans are set up this way to avoid insurance regulation in Texas. These plans are NOT group insurance and do not have the same rights and protections of group policies, such as premium rates and mandated coverage for specific conditions. Some of these plans are limited benefit plans sold by unscrupulous agents with little knowledge and are represented as major medical plans. Get information on the specific health insurance plan and not just the association.
4. Remember the warning signs of fraud:
   
   • Agents who use high pressure or will not let you compare plans from other companies.
   • Agents who tell you this is a "special offer" or "discount rate" good only for today.
   • Agents who use the phrase "guaranteed issue" when pitching their health plan. This usually means the plan has very limited benefits.

Finally, if you feel that you need to file a complaint against the insurance company or agent, you can write or email below:

Texas Department of Insurance
Consumer Protection Program (MC 111-1A)
P.O. Box 149091
Austin, TX 78714-9091
Fax: 512-475-1771
E-mail: ConsumerProtection@tdi.state.tx.us