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Texas Applies Group Rules To Individual-Policy Programs

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The Lone Star State is trying to stop employers and insurers from using health coverage purchased through the individual market to escape group health plan requirements.

Even if employers simply give workers cash that the workers can use to buy their own coverage, Texas may treat those arrangements as employer health benefit plans, according to Texas Commissioner’s Bulletin #B-0028-06.

The bulletin applies to Texas health maintenance organizations, benefit plan administrators and agents as well as to insurers.

Texas law defines a health insurance arrangement as a small group health benefit plan if it provides health care benefits covering 2 or more employees at a small employer and it meets 1 of 3 other requirements, Jennifer Ahrens, Texas associate commissioner for life, health and licensing, writes in the bulletins.

In Texas, Ahrens writes, a health insurance arrangement covering 2 or more eligible employees at a small business is a small group plan if the employer pays a portion of the premium or benefits; the employer or a covered individual treats the health benefit plan as part of a plan or program for purposes of Section 106 or Section 162 of the Internal Revenue Code, or the health benefit plan is an employee welfare benefit plan under Section 2510.3-1(j) in Section 29 of the Code of Federal Regulations.

Texas insurance law includes similar rules for a large employer, Ahrens writes.

“A number of individual health benefit plan coverage arrangements meet 1 or more of the conditions listed in these 3 paragraphs,” Ahrens writes.

Cafeteria plans and health reimbursement arrangements are defined as employee welfare benefit plans under federal law, and Texas treats any cafeteria plan or HRA that helps employees pay for medical care or health insurance as a group health plan, Ahrens writes.

If employers use cafeteria plans, HRAs or some other arrangement to help employees pay for individual health coverage, then insurers must sell the coverage on a “guaranteed issue” basis and cannot exclude any eligible employees or dependents, Ahrens writes.

“Many of the alternative plans the department has seen, while available to employers broadly, do not provide guaranteed issuance at the employee and dependent level and thus are not compliant with Texas law,” Ahrens warns.

Carriers must take immediate action to correct any non-compliant practices, and carriers and agents should ask applicants whether employee welfare benefit plans will be helping the applicants pay for coverage, Ahrens writes.

Ahrens says insurers can cancel coverage if employer reimbursement arrangements were not disclosed or offer the employer all relevant employer plans marketed by the carrier in the employer’s geographic service area.

A copy of the bulletin is on the Web at Document Link