Loss of Health Insurance Coverage in Texas
Texas consumers can lose coverage either from actions they have taken or by actions taken by the insurance carrier. In either instance, there are protections for the policyholder.
It is first important to understand that health insurance policies in Texas are “guaranteed renewable”, which means the carrier cannot terminate the coverage as long as premiums are made in a timely manner. The guaranteed renewable provision applies even in situations where large claims have been submitted. The insurance carrier cannot terminate coverage on the grounds of health-related issues experienced by any covered member of a health insurance policy.
Health insurance carriers can legally terminate a policy for any of the following reasons:
- If the policyholder fails to make premium payments in a timely manner according to the health insurance carriers procedures;
- Submitting materially inaccurate information which was used by the health insurance carrier to make an underwriting decision which would have resulted in the application being denied or a rider to benefits applied; or
- Filing a false claim with the intention to defraud the health insurance carrier.
Health insurance carriers have specific rules that apply in situations involving late premium payments. Premium payments are required to be made on the first day of a renewal period. The renewal period is determined by the original effective date assigned to a policy once it has been reviewed and approved by underwriting. The renewal period can be any day of the month except for the 29th, 30th or 31st of the month because these days do not occur in every month of the year. If the premium payment is not made on the first day of the renewal, the insurance carrier allows a 30-day grace period in which to receive the premium payment. Claims during the grace period, especially claims related to prescriptions, can be denied pending receipt of the premium payment.
Some carriers will allow for reinstatement after the 30-day grace period with a simple written request and payment of the past due premium in addition to a premium payment for the next renewal period. However, it is a common practice for carriers to request that the former policyholder reapply and the applicant for reinstatement can be subject to a change in benefits due to health history or a denial of the application altogether. Other conditions may be applied to a reinstated policy including denial of claims related to an accident if the accident occurred during the reinstatement application period or for an illness occurring within 10 days of a reinstatement.
Texas consumers can also experience a loss of coverage resulting from actions taken by the carrier. If a health insurance carrier operating in Texas becomes insolvent, unable to pay, any claims incurred by the policyholders are the responsibility of the Texas Life and Health Insurance Guaranty Association. The maximum aggregate benefit for health insurance claims covered by the Association is $300,000 per covered individual. The Association does not cover claims resulting from the insolvency of an insurance carrier not licensed in Texas, a HMO, or fraternal benefit society.
An insured member may lose coverage when a health insurance carrier decides to discontinue a specific plan, but the plan must be discontinued for all policyholders. In a situation where a specific plan has been discontinued, the health insurance carrier must offer affected policyholders the ability to purchase another plan with similar benefits. When a carrier withdraws from the Texas market and no longer offers any coverage, the company is barred from reentering the market for three years.
In a situation where the policyholder dies, the surviving spouse assumes the role of policyholder and coverage continues without interruption. If coverage is lost due to a divorce, the policy is split with each individual being granted his or her own policy. In either of these situations, no application is required and the new policies are not subject to any modifications due to health history.
Texas consumers can lose employer sponsored group coverage under the following situations:
- Employment is either voluntarily or involuntarily terminated;
- Full time employment is reduced to part-time employment; or
- Membership in an association that sponsors group health insurance is terminated.
If coverage has been terminated due to death, retirement or divorce, continuation of coverage can be up to 36 months. Continuation of coverage must provide the same benefits as the employer currently offers employees. Continuation of coverage will terminate if the covered individual secures new coverage or if the employer terminates an existing plan. Rules applying to the continuation of group coverage are determined by the number of employees. Companies with over 20 employees are required to provide continuation of coverage according to Consolidated Omnibus Budget Reconciliation Act (C.O.B.R.A.) of 1985. For companies with less than 20 employees continuation of coverage is determined by Texas continuation of coverage.
STATESIDE CAN HELP!
Stateside Insurance Services, since 2003, has focused on providing comprehensive health insurance information, responsive customer service and expert industry knowledge for Texas consumers. Stateside has annually been recognized by health insurance carriers and the Health Insurance Marketplace as a Top Producer in Texas.
Whether the health insurance policy is for an individual, family, small business or supplemental Medicare coverage, Stateside dedicates the time, and our deep industry expertise, to ensure our clients have identified the best health insurance plan for their specific needs.
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