Frequently Asked Questions

2. Covering Dependents

If a plan covers dependents, such as children and grandchildren, they are eligible for dependent health care coverage until the age of 25. State law requires plans to provide comparable coverage for a dependent if the enrolled parent is required to provide medical child support under a court order. The plan may not require the child to live within the service are or to live with the parent. Children with mental or physical disabilities who cannot financially support themselves may be covered indefinitely. The plan may require evidence of disability. Policies that include maternity coverage, and those that allow dependent coverage, must also provide automatic coverage for any newborn child for the first 31 days. After this period, you must notify your carrier if you wish to continue coverage for the child. Large-employer plans also must provide coverage for certain dependent students over the age of 25. However, except for emergency care and authorized referrals, an HMO plan can require dependent students to return to the planīs service area to receive health care services. If two spouses are covered by separate health plans, and both plans cover their dependents, the "birthday rule" takes effect. This means the plan of the parent who has the earlier birthday in the calendar year pays first. For example, the plan of a parent whose birthday is July 3 would pay for a childīs health care before the plan of the other parent born on July 4. However, if the first parentīs plan reaches its benefits maximum, the second plan can take effect. In the event of a divorce, a court usually determines which parentīs plan is a dependentīs primary coverage.

3. Individual Health Plans

Insurance companies and HMOs sometimes sell coverage directly to individuals, in much the same way that auto insurance is sold. These policies can cover the purchasing individual only or include a spouse and dependents. Individual plans can be a good option if youīre self-employed or work for a company that doesnīt offer a health plan. In general, individual plans cost more, and may cover fewer conditions, than employer-sponsored plans or other group plans. Group plans achieve lower rates by spreading the risk of claims over a greater number of people. Add the fact that employers often contribute 50 percent or more toward worke rsī plan costs, and the price of individual coverage can seem even more expensive. Many of the mandated benefits are contained in an individual policy. However, the carrier may offer riders that modify, expand, or restrict an individual policy. The following are common types of health care coverage you usually can buy as an individual:

HMO plans - Managed care plans offered by HMOs that pay for covered health services as long as you use your particular HMOīs network of providers or receive preauthorization for obtaining care outside the
network.

Major medical policies - Policies that cover hospital stays and physician services in and out of the hospital. Major medical policies also may be offered as PPO plans.

Hospital surgical policies - Policies that cover only expenses directly related to hospital and surgical services, such as daily room, surgery, and doctor charges.

Hospital indemnity policies - Policies that pay up to a fixed amount for each day you are in the hospital.

Specified or dread disease policies - Policies that only cover specific illnesses detailed in the policy, such as cancer or AIDS. This coverage also may be offered as a rider to extend the other types of individual coverage.

Short term policies - Policies that only last for a specified length of time, not to exceed 12 months. Short-term policies are most often purchased as a "fill-the-gap" measure by people who lose coverage for some reason but expect to gain it back.

Carriers have the right to evaluate your medical history and other health factors when deciding to offer individual plans. The carrier may deny your application based on health factors, or only offer a plan with an "exclusionary rider" eliminating benefits for certain conditions. Note: As a rule, itīs better to buy one comprehensive HMO or major medical policy. If you need more coverage, these plans often allow you to add benefits. The other types of individual plans may cost less, but they usually provide fewer benefits or may duplicate coverage that you already have.

4. Group Health Plans

Most Texans with health coverage are in employer-sponsored group plans, through either their own employer or their spouseīs employer. The state and federal laws for group plans are somewhat different depending on the size and nature of the group. Texas law contains special provisions and protections for plans offered by small businesses. For instance, some state-mandated benefits that must be covered in plans offered by large employers do not have to be covered in small-employer plans. Finally, there is a special set of federal laws for "self-funded" health plans. These are plans sponsored by groups with the financial ability to bear the costs and risks of coverage themselves, without having to use an insurance company or HMO. Self-funded plans are regulated by the U.S. Department of Labor. TDI has very limited authority over self-funded plans.

Employers and groups arenīt required to offer health coverage to their employees and members, and those that do are not required to contribute toward plan premiums. Some carriers, however, may require employers to pay 50 percent or more of an employeeīs premiums.

5. Buying Life Insurance

Whey you apply to buy a life insurance policy, the company generally will evaluate your risk factors to determine whether to accept you and what rates to charge. At a minimum, you can expect to fill out a health questionnaire as part of the companyīs underwriting process. If you are applying for a policy with more than $100,000 in coverage, you can also expect to provide medical records and take a physical exam. Itīs important that you provide full and accurate information on your application.All life insurance policies have a two-year "contestable period." If the insured dies within this period, the company may investigate the cause of death and reverify the information provided on the application. If the company discovers the insured withheld any information that might have impacted the decision to issue coverage - even if the information is unrelated to the actual cause of death - the company can deny payment of the death benefit. If payment is denied, the company must refund the premiums paid into the policy, however. By law, the contestable period may not exceed two years. If the insured dies for any reason after this period, the company must pay the death benefit. Information the insured disclosed truthfully can never be used as the basis to deny payment. Never allow someone else - including an agent - to fill in personal information on your application, and donīt allow anyone else to sign it on your behalf. In addition, almost all life insurance policies have a suicide clause. This clause stipulates that the company will not pay the death benefit and will return premiums paid if the insured commits suicide during the first two policy years.

6. How Much Life Insurance is Right for You?

There is no precise formula to determine the amount of life insurance a person needs. Some consumer groups recommend buying coverage in the amount of five times your annual household income, while some insurance industry organizations recommend 10 times your income. To decide the amount thatīs right for you, consider your familyīs current and anticipated financial obligations and the amount of time your beneficiaries may have to meet these obligations. It is also important to consider the value of services provided by nonwage earners. For example, a stay-at-home parentīs duties of child care and household management should be included.

7. Life Insurance Basics

When you buy a life insurance policy, you specify whom you want to receive the policyīs death benefits when you die.The people you specify are called "beneficiaries." Itīs important to understand that the primary purpose of life insurance is to help your beneficiaries maintain their standard of living after you die.Life insurance isnīt an investment. A life insurance policy is generally guaranteed to pay death benefits when the policyholder dies.

With an investment, however, thereīs a risk to the payoff - an investor might earn money, but he or she also might lose some or all of it. While some types of life insurance include a savings component that can provide some retirement income, Texas law prohibits marketing life insurance as an investment or retirement income source.If an agent or company tries to sell you a life insurance policy as a good investment, be careful. Complicating matters somewhat, many life insurance companies also sell a legitimate investment product called "annuities." Annuities are financial contracts that are similar in principle to life insurance.

People often purchase these investments to provide for retirement because they can provide a steady stream of income over a long period of time. Insurance companies use a process called "underwriting" to determine which policy applicants to accept and what premium rates to charge. The company will consider certain "risk factors" about you, including your age, gender, medical condition, and whether you smoke or not.Younger applicants who are in good health and who donīt smoke will generally be charged lower premiums. The insurer expects that these policyholders will live longer and thus be able to make more premium payments. Older applicants who have health problems or those who smoke can expect to pay significantly more, however, as their risk of early death are deemed to be statistically higher. In fact, some companies may determine that, based on its review of an applicantīs risk factors, the applicant is too great a risk and decline to issue coverage altogether.

If a company declines to cover you or charges you more for coverage because of your health status or other factors, keep shopping. Different companies have different underwriting guidelines. If you are accepted for coverage, but at a higher rate, ask whether your premium can be lowered later. Some companies will lower your premium if you maintain good health for a specified period of time, give evidence that your health has improved, or change to a less-hazardous occupation.