Health Law & Policy Institute

Small Employers Guide to Health Care Plans

I. Types of Health Benefit Plans and Health Insurance

Self-insured Plans
Traditional Indemnity Plans
PPO Plans
HMO Plans
POS Plans
Medical Savings Accounts

Small Employer Health Insurance Availability Act
Eligible Employees
Employees with Serious Illnesses
Waiting Periods
Dependent Coverage
Types of Small Employer Plans
HMOs
Refusal to Renew a Policy
Enrollment Forms
Purchasing Cooperatives

Factors to Consider
Covered Benefits and Services
Experimental Therapy
Medically Necessary Treatment
Utilization Review
Policy Restrictions
Additional Issues to Consider

Pre-existing Conditions
Genetic Tests

Factors to Consider
Obtaining Information About Quality
National Committee for Quality Assurance (NCQA)
Health Plan Employer Data Information Set (HEDIS)
Report Cards
Office of Public Insurance Counsel (OPIC)

Continuation Coverage
Entitlement Benefits

VIII. Employment Questions

ADA

I. Types of Health Benefit Plans and Health Insurance

Health benefit plans come in a variety of forms, including indemnity, preferred provider organization, health maintenance organization and point-of-service plans, and medical savings accounts.

Employers who want to provide health insurance to their employees have many coverage options and cost decisions to make. Initially, employers must decide whether to self-fund or to contract with an insurance company or managed care organization that accepts risk in exchange for set premium payments. Employers must also consider the extent of cost-sharing they wish to bear with employees (e.g., subsidizing premiums and determining deductibles and copayment amounts). The following types of group coverage are available from which to choose:

• Traditional indemnity plans;
• Preferred Provider Organization (PPO) plans;
• Health Maintenance Organization (HMO) plans;
• Point-of-Service (POS) plans; and
• Medical Savings Accounts.

Self-funded or self-insured health benefit plans place the financial risk of providing health care for employees on the employer. In a self-insured plan, the employer pays health care providers directly or indirectly through a third-party administrator. Self-insured plans may operate in the same manner as indemnity plans, PPO plans, or HMO plans. The federal Employee Retirement Income Security Act of 1974 (ERISA) excludes self-insured plans from state regulation through the Texas Department of Insurance (TDI) or any other state agency. Limited federal protections exist; most of these protections require employers to adhere to the plan's terms. This distinction is important, because an employee in a self-insured plan has few of the protections that state laws governing insurance companies and HMOs generally provide. Although large employers favor self-funded plans, small employers may find the plans inappropriate for at least two reasons: 1) small employers may be unable to assume the financial risk of self-insurance; and 2) self-insured plans are more complex to establish and administer. Traditional Indemnity Plans Traditional indemnity plans allow employees to go to any doctor or hospital they choose and to receive benefits for covered services. Health care providers are paid on a "fee for service" basis under the plans. Employees bear responsibility for paying annual deductibles and any coinsurance payments and filing claims for reimbursement.

Employer-provided traditional indemnity "fee-for-service" comes in several forms, including:

• group health insurance;
• small employer health plans; and
• medical savings accounts with catastrophic/high-deductible policy.

PPO Plans PPO plans are an easy way to transition to managed care. They allow employees to retain the flexibility to choose their doctor or hospital every time they need health care, but provide the highest level of benefits when care is received from any doctor or hospital participating in the PPO network. When an employee sees a PPO provider, the employee will pay a set copayment for care and any coinsurance. The PPO provider will usually file the employee's claims and pre-certify any care the employee needs. Alternatively, an employee may choose to use any non-network provider if the employee is willing to receive a reduced level of benefits, including paying more for care. HMO Plans HMO plans offer employers a way to reduce health care premiums and still provide coverage for employees. HMO plans require employees to select a primary care physician (PCP) from whom they receive the majority of their health care services. Since PCPs provide or refer employees' care, less chance exists for services to be unnecessarily performed or duplicated, helping to control overall costs. PCPs are typically internists, family or general practitioners, pediatricians, and, sometimes, obstetricians/gynecologists. No annual deductible or claim filing is required when employees see their chosen PCP for care. Employees simply pay a small copayment for routine physician office visits. PCPs pre-certify employees' care and refer employees to network specialists, if necessary. Typically, HMO plans only cover emergencies when employees travel out of the network service area. Out-of-area care for employees' dependents may be limited, if provided at all. POS Plans POS plans are essentially two health care plans in one: an in-network plan that works like an HMO plan and an out-of-network plan that works more like a traditional indemnity plan. Both options are available under the umbrella of the POS plan. Employees make the choice about using in-network or out-of-network benefits every time they need health care services, which explains why the plan is called "point-of-service." Employees obtain maximum benefits when care is provided or arranged through their chosen in-network PCP. When their PCP provides their care, employees pay a set copayment with no annual deductible and receive maximum benefits, some of which are not covered out-of-network. If employees choose out-of-network care, they pay more for care, including paying an annual deductible, must file their own claims, and must have certain treatment or services pre-certified. Medical Savings Accounts Medical Savings Accounts (MSAs) offer employees a way to receive health care insurance, an alternate means to pay for health care services, and an opportunity to set aside tax-deductible funds. All or part of the funds in an MSA may be used to cover routine medical expenses. Any balance is left to grow, tax deferred. MSAs are available to employees if a small employer (defined as one who employees 50 or fewer employees) offers a qualified high-deductible (catastrophic) plan. If the employer has provided a health benefit plan for employees in the past, the money the employer spent will be divided into two groups for establishing MSAs. One portion purchases a high-deductible health benefit plan for major medical expenses; the other portion creates a cash account for each employee to spend on routine medical care. MSA contributions are limited to a percentage of the deductible for the high-deductible plan the employer chooses. Contributions may be made by the employees or their employer, but not both in the same year, and are limited to a percentage of the plan's deductible. Individual employees may contribute up to 65% of the policy deductible, and families may contribute up to 75%. Since MSAs are employee-owned, the employees retain the right to withdraw money at any time for any purpose. MSA withdrawals for qualifying medical expenses are not taxed. However, if an employee makes a withdrawal for a non-qualifying expense, the employee may be charged a 15% penalty. An MSA balance will carry over from year to year and may earn tax-free interest if it is used only for qualified medical expenses or remains in the account until the employee is age 65 or disabled. MSAs are part of a four-year pilot project that is scheduled to end in the year 2000. The final project data will determine MSAs' longevity in the marketplace. However, any contributions made to existing plans, less withdrawals, will remain intact. II. Small Employer Group Health Insurance The Small Employer Health Insurance Availability Act provides competitive and affordable health benefit plans and allows the pooling of employers to spread the risk and premium costs among more purchasers. What is the Small Employer Health Insurance Availability Act? The Texas Small Employer Health Insurance Availability Act ("Act") was created to provide competitive and affordable health benefit plans and allow employer pooling to spread the risk and premium costs among more purchasers. The Act limits rate increases so employers can determine their plan costs with greater predictability. As defined by the Act, a small employer is a business that operates with two to 50 eligible employees. An individual proprietor is usually counted as one of the employees. Any insurer or comparable entity providing a small employer health benefit plan in Texas is required to file for certification with the TDI, and, upon approval, is considered a "small employer carrier" subject to the provisions of the Act. Carriers may elect to serve a particular geographical area, usually indicated by county or zip code. This preference must be certified, helps prevent discrimination in availability, and ensures adequacy of service. Who is an eligible employee? An eligible employee is employed full-time and works 30 hours or more a week. Employees are not eligible if they are temporary or seasonal help or are covered under a separate health benefit plan. Does the Act require small employers to provide health insurance for employees? No. The Act does not require an employer to provide any type of health benefit plan to employees. If the employer selects a group health benefit plan, however, every eligible employee and the employee's dependents must be offered the option of enrollment in the group plan. How much is the employer obligated to pay? Small employer insurance carriers set the standard employer contribution according to the carriers' standard marketing practices. The amount set must be consistent among all small employers carrying the plan. According to the TDI, it is not unusual for the employer and the employee each to pay 50%. The cost of any dependent coverage falls entirely on the employee unless the employer chooses to contribute as part of a benefit package. What if an employee has a serious illness? Can the carrier refuse to insure all of the employers' employees or require more money to cover that employee? The Texas Insurance Code requires small employer insurance carriers to issue health benefit plans without regard to health considerations. As a result, the carriers may not discriminate against an employer or an employee due to an employee's health condition if the employer meets all of the Act's participation requirements. In any case, the carrier must make a decision based on the entire group. The carrier may not offer a policy exclusive of any eligible employees or their dependents. Can an employer choose which employees to insure? No, the same coverage must be offered to each eligible employee and his or her dependents. Employees may be offered a choice between different plans, but each employee must be offered the same choices. The choices may not be limited due to any health risks, except for special provisions for pre-existing conditions. Like the insurance carrier, the employer must accept or reject the entire group of eligible employees for coverage. What if an employee chooses not to participate? An employee is free to choose not to participate, but small employer insurance carriers may require as many as 75% of eligible employees to participate as a condition to issuing the policy. Carriers are allowed to lower the percentage for qualification, but must do so equally for all of the small employers they serve. Carriers are required to get a waiver from each eligible employee who declines coverage. The waiver may require a written explanation for declining coverage and a sworn statement that the choice is voluntary and free of any coercion. Carriers are also required to provide information about penalties for late enrollees and open enrollment dates. Must employees must wait a specified period of time before they can benefit from the health benefit plan? Under Texas law, a small employer health benefit plan waiting period may not exceed 90 days from the first day of an employee's full-time, permanent employment. What if employees have a pre-existing condition? Special rules exist that help protect everyone, including employees, with pre-existing conditions from denial of coverage or discrimination. The maximum waiting period for full coverage for any individual with a pre-existing condition, including employees, is one year. What if the employer hires a new employee? Every employee must be given at least 31 days from the date of hire to enroll in the health benefit plan. If a waiting period is imposed, then the 31 days begins after the last day of the waiting period. Employees who do not choose to join the plan at this time may be required to wait up to one year. Every plan is required to provide at least a 31-day window each year, called "open enrollment," during which an employee or dependent may enroll in the plan without penalty. If an employee does not enroll during the initial enrollment period or fails to enroll dependents within 31 days of birth, adoption, or custody, then the employee is classified as a late enrollee. Plans may vary in requirements for enrolling dependents. Do plans have to cover all dependents? If an employer offers coverage for employees, Texas law requires that every employee have the option to purchase dependent coverage. The employer has the right to decide, however, whether to subsidize the cost of the additional premium. The small employer insurance carrier may not require any dependents to enroll but must offer coverage for all dependents regardless of whether they are covered by other plans or policies. The terms of each policy should be checked to determine dependent qualifications. What kinds of plans are offered under the small employer laws? Insurers are required to provide standard basic and catastrophic plans in addition to any other plans they might have available. The Texas Insurance Code requires any agent or company that solicits an employer's business to provide the employer with a summary of both plans, including the limitations and exclusions of coverage, in understandable language. The basic plan has a $500 deductible and maximum out-of-pocket expenses of $3,000. The catastrophic plan has four options with deductibles from $2,500 to $5,000 and maximum out-of-pocket expenses of $5,000 to $10,000.

The percentage that the employee pays may vary according to the options for catastrophic coverage and "preferred provider" plans. Generally, the higher deductible policy has cheaper premiums, as shown below in the chart from the TDI. Small employer insurance carriers may offer additional deductibles, coinsurance maximums, and percentage payable amounts, subject to certain guidelines.
 

Are HMOs subject to the Act? HMOs must comply with Texas and federal insurance laws unless they contract with a self-funded employer plan. Instead of the standard plans discussed earlier, HMOs may offer a standardized plan developed by TDI, a plan that meets federal guidelines for HMOs, or a POS plan. Most HMOs require patients to use their network of health care providers, but some HMOs offer a POS option. Can a small employer insurance carrier choose to drop an employer's policy or refuse to renew an existing policy? Small employer health benefit plans are "guaranteed renewable." Texas law requires a small employer insurance carrier to continue the policy unless the employer fails to pay the premium or violates other terms of the policy. Acceptable reasons to cancel a policy include failure to pay premiums, intentional misrepresentation or fraud, and termination of employer membership in an association providing plan eligibility. The insurance carrier may decide to get out of the business of providing small employer health benefit plans. The Texas Insurance Code requires the carrier to provide 90 days notice to each small employer that it is canceling or not renewing a policy, to offer other small employer coverage by the carrier or another insurer, and to act uniformly without regard to health or claims status of employees. Violation of policy terms or failure to pay the premium are the only acceptable grounds for cancellation or failure to renew unless the insurer will no longer be classified as a small employer insurance carrier. If the insurer decides to cancel a small employer policy for any reason other than a violation, it must refrain from business in that area for five years. Does an employer have to disclose everything on the enrollment forms? Yes. The federal Health Insurance Portability and Accountability Act (HIPAA) and the Texas Insurance Code provide protection for small employers and help increase affordability and availability of coverage despite any medical conditions. Accurate information is important to ensure coverage and renewability. Aside from failure to pay premiums, fraud or misrepresentation is one of the only grounds for cancellation of a small employer health benefit plan. As a result, employers must provide accurate information. Can insurers require that an employer purchase extra insurance or a "package deal?" No. While other coverage may be provided at a cheaper rate or as part of a benefit package, insurance carriers may not require small employers to purchase additional coverage (e.g., life or disability insurance) as a condition for providing or refusing a health benefit plan. What are purchasing cooperatives? Cooperatives provide small employers with an opportunity to pool their purchasing power to gain more negotiating power with small employer insurance carriers. Purchasing cooperatives registered with the TDI are listed at TDI's web site. Any group of two or more small employers may form private cooperatives, provided they meet certain requirements and are nonprofit. The cooperative must seek incorporation from the secretary of state and register with the commissioner of insurance. III. Preliminary Questions to Ask When Evaluating a Plan In evaluating a health benefit plan, a small employer should consider services covered, cost, convenience, choice of physicians and hospitals, and quality. What factors should an employer consider in comparing health benefit plans?

In evaluating or comparing health plans, a small employer should consider several issues, including:

• services covered;
• cost;
• convenience (location of doctors/hospitals and whether a claim must be filed to be reimbursed for covered services);
• choice of physicians or hospitals;
• referral policies (to specialists); and
• quality (services covered, choice of physicians and hospitals, and referral policies to specialists).

The "best" health benefit plan for employees depends on their life situations, such as whether they have or are at high risk for developing cancer, are starting a family or retiring, or have chronic health conditions or disabilities. An employer should get answers to questions that are important to it and its employees, including:

• How does the plan treat pre-existing conditions?
• Does the plan provide for cancer prevention and early detection programs?
• Does the plan allow prompt and direct access to cancer specialists? If an employee has been diagnosed with cancer, does the plan allow the employee to designate an oncologist (cancer specialist) as his or her PCP?
• Will the plan pay for patient care costs associated with participating in clinical trials?
• What is the premium (cost) and under what circumstances can the premium be raised?
• How much are the deductible, co-payment, and maximum out-of-pocket yearly expense for employees?

Some health benefit plans, particularly HMO plans, cover physical exams and health screenings (i.e., preventive care). Most plans that cover major medical expenses provide coverage for hospital and physician fees, surgical expenses, anesthesia, x-rays, laboratory fees, emergency care, and maternity care. Some, but not all, plans cover mammography, chemical dependency, prescription drugs, dental, vision, mental illness or other psychiatric care, and home health, nursing home, and hospice care. In addition to reviewing what is covered, a small employer should consider any financial or other limitations on the coverage offered. For example, a plan may cover physical therapy expenses, but limit coverage to a certain number of visits annually. Some health benefit plans provide coverage for cancer prevention and early detection programs. Prevention programs may include programs that help members stop smoking or abusing alcohol or that provide guidance on proper diet and nutrition. Early detection programs may include coverage for cancer screening and early detection tests, including genetic tests. Cancer patients are particularly interested in what coverage is provided for mammography and other radiology services, pap smears, outpatient physical and occupational therapy, and clinical laboratory procedures, such as blood tests, urinalysis, and tissue cultures. Cancer patients are also interested in whether a health benefit plan provides access to specialized supportive care to improve patients' quality of life (e.g., powerful symptom control, optimum pain relief, mental health care, and end-of-life care). What about coverage for "experimental" therapy? Most health insurance policies do not cover treatment that is experimental or investigational. However, virtually every treatment is "experimental" when first introduced. As a result, the issue is really whether the proposed treatment is experimental based on current information. If a physician believes an employee needs a treatment that the small employer insurance carrier has denied as experimental, the carrier needs to be convinced that experts in the field recommend the treatment, that the patient will benefit from the treatment, and that the treatment is not just for the benefit of furthering scientific research. A small employer should also consider whether a health benefit plan allows access to high-quality clinical trials or pays for patient care costs associated with participating in clinical trials. What is "medically necessary treatment?" Insurance carriers and HMOs only cover "medically necessary" care. Texas law defines "appropriate and medically necessary" care as "the standard for health care services as determined by physicians and health care providers in accordance with the prevailing practices and standards of the medical profession and community." For example, most health benefit plans refuse to pay for laetrile therapy to treat cancer currently, because it has not been shown to be safe and effective. A bone marrow transplant to treat breast cancer might be refused on the basis that such therapy is unproven in the treatment of that type of cancer. Is a plan required to cover treatment that is not medically necessary? A health benefit plan is not required to cover treatment that is not "medically necessary." A problem may arise when a plan refuses to provide (or pay for) treatment an employee or the employee's physician feels is medically necessary (e.g., a lab test, specialist referral, or prescription medication). A problem may also arise when the employee's PCP refuses to authorize a specialist referral or test that the employee feels is needed or when the plan administrator or a utilization review agent refuses to approve a treatment on which the employee and PCP agree. What is utilization review? The utilization review process evaluates requests for medical treatment and determines whether the treatment is medically necessary. Texas law allows HMOs and insurance companies to conduct a utilization review of proposed or ongoing treatment. What restrictions does a health insurance policy include? A small employer should review restrictions on coverage contained in any health insurance policy it is considering, especially restrictions on cancer treatment. Most policies have a lifetime maximum on what they will pay. Some have a lifetime maximum per illness, per member, and/or per family. Many policies require pre-certification before hospitalization. Pre-certification means someone must contact the health benefit plan's representative and get approval before the plan will agree to pay for services. Health insurance policies also have limits for hospital room charges, amounts paid specialists, the number of hospital days covered, and other restrictions and limits. What additional issues should a small employer consider in evaluating a plan?

A small employer should consider:

• access (ease of obtaining appointments, waiting time in physicians' offices, telephone access to physicians);
• continuity (do patients see the same physician each time care is sought, what provision is made for changes in the plan oncologist);
• coordination (how is care between PCPs and specialists coordinated); and
• flexibility (switching physicians, second opinions, denials of care, and for cancer patients, will the plan allow an oncologist (cancer specialist) to act as the PCP if the patient chooses).

A pre-existing condition is a health condition that exists before the health insurance policy is purchased. Pre-existing conditions may not be covered in some policies for up to 12 months.

What is a "pre-existing condition?"

• A pre-existing condition is a health condition that exists before the health insurance policy is purchased. Generally, for both group and individual health benefit plans, if a person has seen a physician within the previous 6 months (this period may vary in different plans) for a health condition, that particular condition will not be covered for up to 12 months. The National Coalition for Cancer Survivorship (NCCS) notes that cancer survivors have a pre-existing condition from the time of diagnosis through the remainder of their lives, since cancer survivors usually need to see a physician at least once a year for a checkup.

• HIPAA may protect employees with group health benefit plans who change jobs (and therefore plans) by giving employees "credits" against the waiting period for coverage of pre-existing conditions. For example, if an employee is covered by one employer's health benefit plan for 10 months, the maximum 12 month waiting period is reduced by the 10 months the employee was already covered under the prior plan, so the maximum waiting period for the pre-existing condition is two months. If an employee has worked 12 months or longer for the first employer, there will be no gap in coverage. No waiting periods may be used for coverage of pregnancy, newborns, or adopted children.

• If an HMO offers to cover a group, no employee or dependent of an employee who is a member of the group may be denied coverage for a pre-existing condition.

• Texas law prohibits insurance companies and HMOs from denying coverage because of a woman's diagnosis or history of a fibrocystic breast condition.

• A child subject to court-ordered medical support (e.g., pursuant to a divorce decree) may not be denied coverage by an insurance carrier basis of a pre-existing condition.

A genetic test is a specialized laboratory test that measures inherited traits for predisposition to a clinically recognized disease or condition. Genetic tests are increasingly used to predict the risk of cancer. A genetic test may show the relative likelihood of an employee or dependent eventually having a disease or condition. "Genetic test" (as defined under the Texas Insurance Code) does not include a routine physical examination or a chemical, blood, or urine analysis. May a health insurance carrier require that employees undergo a genetic test as part of the application process? Texas law provides that a group health benefit plan may require genetic tests only in limited circumstances. Where testing is permitted, the insurance carrier must notify the applicant that the test is required, disclose to the applicant the proposed use of the test, and obtain the applicant's consent. The law does not apply to individual health insurance policies or self-insured employer plans. May coverage be denied based upon the results of a genetic test? A group health benefit plan may not use genetic information to reject, deny, limit, cancel, refuse to renew, or increase the premiums for coverage under the plan. This legal restriction does not apply to disease-specific (e.g., cancer-only) policies or to Medicare supplemental policies. V. Evaluating Quality in a Health Benefit Plan A small employer should consider plan accreditation status, credentials, performance (measured by report cards), preventive care, quality management, and member satisfaction in evaluating the quality of a health benefit plan. What factors should a small employer consider in evaluating a plan's quality
For traditional indemnity plans issued by insurance companies, quality refers mostly to financial strength and claims handling. A. M. Best Co. rates insurance companies. A small employer should try to purchase from a company rated A or A+. The A. M. Best Co. directory is available in many public libraries. The TDI's website also has "links" for insurance rating companies (see References and Additional Resources at the end of this booklet).

For managed care plans, quality is measured by:

• plan accreditation status;
• credentials/accreditation status of participating providers (physicians, medical groups, "centers of excellence," hospitals);
• performance (process and outcome measures, report cards);
• preventive care;
• quality management; and
• member satisfaction.

General information may be obtained from a health benefit plan's marketing brochures, sample benefits contract, and questions to the plan's customer service office. Some HMOs have "report cards" based on member surveys and other information. What is the National Committee for Quality Assurance (NCQA)? The NCQA is an independent, non-profit organization that assesses and reports on HMO plan quality. NCQA also "audits" report cards that HMOs issue. NCQA offers accreditation to HMOs?essentially a "seal of approval" granted after physician reviewers and quality experts evaluate how well a health benefit plan manages its network. NCQA publishes an "accreditation status list" with a list of plans it has reviewed plus their accreditation status (i.e., full, one-year, provisional accreditation, or denial). About one-half of all HMOs have applied for accreditation, and about one-third have received full (three-year) accreditation. An employer can contact the NCQA to find out the accreditation status of an HMO plan it is considering. What is the Health Plan Employer Data Information Set (HEDIS)? HEDIS is a health plan survey that measures about 60 different health care areas to determine and quantify the quality of services that HMOs offer. Recently, HEDIS added member satisfaction to the areas measured. What is a "report card?" Health benefit plan report cards compare the quality of plans. Report cards review rates of immunizations, cervical cancer screening, mammograms, cholesterol screening, and other benefits that plans provide. Recently, report cards added patient ratings of quality and satisfaction. Sources for report cards include: 1) organizations such as U.S. News & World Report and Consumers' Checkbook; and 2) the plans themselves, usually based on HEDIS data. Some, but not all, plans have their report cards audited (reviewed) by NCQA. The State of Texas has also issued report cards on many Texas health benefit plans. Do all health benefit plans have report cards? It depends. Health benefit plan representatives should be asked whether they have any report cards available for the plan. Publications, such as U.S. News & World Report or Consumer's Checkbook, should also be reviewed. If the plan has a report card, the small employer should obtain a copy and ask whether NCQA has audited it. What information is contained in report cards issued by the Office of Public Insurance Counsel (OPIC)? Texas legislation passed in 1997 requires the OPIC to collect a variety of quality data on Texas HMOs and prepare a report card comparing Texas health benefit plans, including small employer plans. Texas report cards use HEDIS data together with another survey instrument, known as the Consumer Assessment of Health Plans Study (CAHPS). CAHPS is similar to HEDIS but places a greater emphasis on patients' assessment of the care process, including health care professionals, access, continuity, and coordination of care. See Comparing Texas HMOs 1998, available at OPIC's web site. VI. Retaining Insurance Coverage Employers may legally cancel health insurance coverage at any time. State law limits an insurance company's ability to cancel individual employees covered under a group policy. Once health insurance coverage is obtained, may an insurer or employer deny future coverage based upon the number or amount of claims that employees file? Employers are not required to provide health benefit plans to their employees, and may legally cancel coverage for the entire group at any time. Some group policies allow the insurance company to cancel an individual's employee coverage for fraud or upon reaching the individual's "lifetime maximum" for benefits under the policy. An insurance company that covers the group may not cancel a small employer on the basis of (non-fraudulent) claims made. Some policies also have lifetime maximums for the amount to be paid for specific diseases or conditions. What is COBRA?

The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) allows an employee (and/or the employee's dependents) to keep employer-sponsored health insurance coverage for 18 to 36 months if the employee loses his or her job for any reason except "gross misconduct." Under certain circumstances, COBRA also allows the employee to extend insurance coverage lost because of reduced work hours. COBRA does not apply to employer health benefit plans with fewer than 20 employees. COBRA coverage applies in several cases, including:

• death of a covered employee;
• termination of employment (other than for gross misconduct);
• divorce;
• employee becoming entitled to Medicaid; or
• dependent child ceases to be dependent.

• a covered employee;
• a spouse or dependent child of a covered employee; or
• a retired covered employee.

Upon termination, an employer must notify eligible employees of their rights under COBRA. Within 60 days of qualifying for COBRA coverage (e.g., 60 days from termination), the employee must advise his or her employer that the employee wishes to continue coverage under COBRA. The employee must also pay the entire monthly premium for coverage (including any portion previously paid by the employer) plus an administrative fee of 2%. How long do COBRA benefits last? Former employees are entitled to an 18-month extension of benefits. Dependents and divorced spouses are generally entitled to a 36-month extension of benefits. Can COBRA benefits be extended? Yes, certain events, such as divorce, may extend COBRA benefits for an additional 36 months. Can COBRA benefits be discontinued?

Yes, COBRA benefits may be discontinued in the following situations:

• An employer ceases to offer an insurance plan to current employees.
• An employee becomes eligible for another plan (unless such plan has an exclusion for pre-existing conditions; if so, the employee keeps the original policy until the pre-existing exclusion expires).
• An employee applies for and obtains Medicare coverage.
• An employee fails to pay the monthly premiums.
• An employee fails to accept COBRA coverage within 60 days of becoming eligible for it.

The Dallas office of the U.S. Department of Labor, Pension and Welfare Benefits Administration, at 1-214-767-6831, has additional information about COBRA coverage. Also, if COBRA does not apply to a given situation or an employee's COBRA coverage has expired, the employee may be entitled to state conversion or continuation options, and should be advised to contact the TDI, at 1-800-252-3439, for assistance in determining eligibility. How does HIPAA affect insurance coverage? HIPAA helps protect people, including employees and their dependents, with pre-existing conditions from losing coverage temporarily when the employee changes jobs. Most health insurance policies (but not HMOs) do not cover "pre-existing conditions" for a period of 6 to 24 months. HIPAA limits these periods to a maximum of one 12-month period, and also reduces the pre-existing condition exclusion period by one month for each month an employee was covered under his or her old plan. For example, if an employee has a history of cancer and switches from one employer health benefit plan to another because of a change in job, HIPAA reduces the length of any pre-existing condition waiting periods. HIPAA does not help an employee who leaves an employer without a health benefit plan-in this case, the new employer's plan may impose waiting periods of up to one year before covering a pre-existing condition. VII. ERISA ERISA is a federal law that regulates employee benefit plans, such as pension plans and some health benefit plans. What is ERISA? ERISA is a federal law that regulates benefit plans that employers offer, such as pension plans and some health benefit plans. If an employer is self-insured, ERISA excludes the plan from state regulation. For example, where an employer contracts with an HMO to provide health care services through a self-funded plan, the plan is not subject to TDI or other state agency regulation. How may ERISA affect an employee insurance claim? If a health benefit plan is subject to ERISA, the employee may not have the protection of state laws that regulate insurance companies or HMOs. VIII. Employment Questions The Americans with Disabilities Act (ADA) is a federal law that prohibits discrimination against individuals with disabilities. What is the ADA? The ADA is a federal law that prohibits discrimination against individuals with disabilities. The ADA covers employers with 15 or more employees. May an employer terminate an employee because the employee suffers from a serious illness such as cancer? No. An employer cannot terminate an otherwise qualified employee on the basis of the employee's disability. A person who is substantially impaired in one or more major life activities, has a record of such an impairment, or is regarded as having such an impairment is considered "disabled" under the ADA. Cancer is usually considered a "disability" for purposes of the ADA. As a result, the ADA more than likely protects individuals with cancer. The ADA also prohibits discrimination against associates of individuals with disabilities. For example, it is illegal for an employer to terminate an employee whose spouse has cancer based on fears that the added stresses or time demands may affect the employee's performance or attendance or result in higher health care costs. Can an employee be fired because cancer prevents the employee from working? Perhaps. The ADA requires that employers make "reasonable accommodations" for "otherwise qualified" employees. An "otherwise qualified" employee is one who can perform the job's essential functions, with or without reasonable accommodations. Employers are only required to accommodate individuals who make their disabilities known to their employers and let their employers know that some accommodation is required. Moreover, if an employee requests an accommodation, the employer may request documentation of the employee's disability (if the disability is not obvious). What if an employee wants to continue working, but only part-time? Job restructuring may constitute a reasonable accommodation. However, work attendance is generally considered to be an essential job function, and an employer may not be required to accommodate an employee's sporadic attendance over a prolonged period of time. While employers must provide reasonable accommodations, they are not required to incur "undue hardship." What constitutes undue hardship depends on the cost or inconvenience of the accommodation and the resources of the employer. For example, reassignment of job responsibilities may be less burdensome to a large company with more personnel than to a smaller business with only a few employees in each position. An additional consideration for the employee is that voluntary acceptance of part-time work may jeopardize some or all employee benefits. IX. References and Additional Resources A wide variety of government and private resources are available to employers who want to better understand health care plans. Agency for Health Care Policy and Research (AHCPR), Choosing and Using a Health Plan, Executive Office Center, Suite 501, 2101 East Jefferson Street, Rockville, MD 20852, 1-800-358-9295. http://www.ahcpr.gov American Cancer Society, 1-800-ACS-2345. http://www.cancer.org Association of Community Cancer Centers (ACCS), Cancer Treatments Your Insurance Should Cover, 11600 Nebel Street, Suite #201, Rockville, Maryland 20852. http://www.assoc-cancer-ctrs.org Consumers' Checkbook, Consumer's Guide to Health Plans, 1-800-475-7283. http://consumer.checkbook.org/consumer/health/hmo.htm Health and Human Services In Texas: A Reference Guide (available at some public libraries-contains detailed information on federal and state health care programs). Health Insurance Association of America (HIAA), The Insurance Guide for Business Owners and Guide to Medical Savings Account (MSA)/High Deductible Health Plans (HIAA is a national trade association whose members are insurers and managed care companies). http://www.hiaa.org Health Law & Policy Institute, University of Houston Law Center. http://www.law.uh.edu/healthlaw Medicare, 1-800-772-1213. http://www.medicare.gov/whatis.html National Coalition for Cancer Survivorship (NCCS), What Cancer Survivors Need to Know About Health Insurance, 1011 Wayne Avenue, 5^th Floor, Silver Spring, MD 20910, 301-650-8868. http://www.cansearch.org National Committee for Quality Assurance (NCQA), Choosing Quality: Finding the Health Plan That's Right for You (NCQA's Guide for Consumers), 1-888-275-7585. http://www.ncqa.org/consumer.htm Office of Public Insurance Counsel (OPIC), Comparing Texas HMOs 1998, 333 Guadalupe Street, Suite 3-120, Austin, TX 78701, 512 322-4143. http://www.opic.state.tx.us Physicians Who Care, Inc. (a nonprofit organization that espouses the private practice of medicine, site contains information about MSAs). http://www.msapage.org Texas Cancer Council. http://tcdc.uth.tmc.edu/tcc.html Texas Department of Health, 1100 West 49th Street, Austin, Texas 78756-3199, 512-458-7111 or 512-458-7714 (hearing impaired). http://www.tdh.state.tx.us Texas Department of Insurance, Questions and Answers About Your Health Care Coverage, 333 Guadalupe, Austin, TX 78701 (Mail - P.O. Box 149104, Austin, TX 78714-9104), 512 463-6169 or 1-800-578-4677. http://www.tdi.state.tx.us/index.html Texas Health Care Information Council, Your HMO Quality Check-up, Straight Talk on Texas HMOs, 4900 N. Lamar, Suite 3407, Austin, TX 78751-2399, 512-424-6492. http://www.thcic.state.tx.us Texas Rehabilitation Commission, 512-483-4067 or 1-800-628-5115 (hearing impaired). http://www.rehab.state.tx.us/index.html

U.S. Department of Labor, Pension and Welfare Benefits Administration, 214-767-6831. http://www.dol.gov/dol/pwba