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Pros & Cons of Healthy Texas insurance

by Tony Novak, CPA, MBA, MT,   November 19, 2010   revised June 30, 2012

 

Financial help offered to small businesses and their employees that start health insurance plans

Texans seem to have strong opinions of the Healthy Texas insurance program; and some recent reactions to the new program have been surprising. For some small businesses and their employees it is the key to finding insurance at a reasonable price. Hospitals and physicians see it as expansion of government control on medical services. Other taxpayers might see it as a government subsidy for a few health insurance companies. The program leverages public and private funds for the payment of health insurance claims, rather than providing a premium subsidy.

Key components of Healthy Texas program, as envisioned by the state legislature, are:

• Lower premiums. Actuarial projections show an average premium around $200 per person per month with a range from $135 to $465.
• Reduction in the wide variability in premiums charged to lower- and higher-risk groups. All groups will be charged rates closer to the average.
• Health status will not be used to set premium rates (no medical underwriting). People need access to affordable coverage both when healthy and sick.
• A small number of plan options that offer choice, but also allow small employers to easily understand the differences in plans and make direct comparisons of policies among health plans.
• Reasonable rates. Rates charged will be reviewed and approved by the Texas Department of Insurance (TDI) to ensure they are reasonable in relation to benefits and properly reflect the reduced risk to carriers.
• Coverage targeted to small employers with low-wage earners who have the most difficulty affording coverage in the private market.
• Flexibility for Texas Department of Insurance to monitor the program and make adjustments.

It is too soon to tell, at this point, whether any of these objectives will be met.  Yet is seems clear that, like other aspects of health care reform, the impact may fall short of the original hopes.

State officials are enthusiastic. “What’s great about this project is that it really stretches limited taxpayer dollars to insure more Texans,” said Texas Health and Human Services Executive Commissioner Tom Suehs. “The employer still covers most of the insurance cost, and the state will provide extra help to employees who may not be able to afford their portion of the premiums or the co-pays for the coverage.”

Some taxpayers see it differently. Since the current Healthy Texas pays funds directly to insurance companies, some see it as a subsidy to the health insurance industry. The state argues that premium savings achieved through the investment of public reinsurance can be directly measured and monitored but this effect is not visible to the consumer. Funding also pays for outreach, marketing and related costs to launch the new Healthy Texas initiative. Funds are not available directly to consumers to pay premiums or co-payments.

The grant through the federal Health Resources and Services Administration covers five years at up $10 million a year, and the state will contribute a 20 percent match. HHSC will use the funding to create cost savings accounts for Texans earning up to 300 percent of the federal poverty level, or about $66,000 for a family of four.

Healthy Texas is one of three new statewide initiative that helps small businesses offer affordable health insurance to employees. It lowers premiums by using a state-funded pool to help cover employees with high health care costs. It will begin enrollment in the summer of 2010. The other programs are:

  • TexHealth Coalition provides affordable health coverage to small businesses in Galveston and Central Texas. It will expand to Houston, Dallas, El Paso and the Brazos Valley within a year.
  • Community First Health Plan will begin offering a new coverage for small employers in Bexar County and seven surrounding counties in January.

Cost sharing accounts, when made available through this program, could help low-income employees pay for insurance premiums or co-pays and deductibles. The account is still managed by the health plan, but the employee would direct how the funding is used to best meet their health care needs.

Following is a summary of the Advantages and disadvantages of the Healthy Texas program as it exists today.

Advantages of Healthy Texas insurance

  • Lower premium rates than other employer-provided group insurance plans
  • The premium rates are subsidized to encourage stabilization
  • Insurance is guaranteed issue regardless of medical history
  • No premium surcharge for high risk applicants
  • Group type coverage includes mandated benefits like maternity coverage and diabetic care
  • Rates are based only on employees' age, sex and location of residence
  • May cover part time workers and sub-contractors
  • "Mom & pop" businesses are counted as eligible 2 person businesses

Disadvantages of Healthy Texas insurance

  • Pre-existing conditions are excluded from coverage for the first 12 months of the policy
  • Employer must pay at least half of the premium cost
  • Not be as cost-effective to the business as other Health Reimbursement Arrangements that use individual insurance coverage obtained through the Texas insurance exchanges
  • Not available to one person businesses
  • Not available for businesses with more than 50 employees
  • Only two health insurance companies participate in the program
  • Limited choices in health plan design, benefits, deductibles, etc.
  • Limited number of participating doctors and hospitals; no out-of-network coverage
  • Does not provide out-of-state coverage
  • Only available to businesses whose employees' average earnings are low
  • Not available to businesses that already have a health plan
  • May require a waiting period to cover pre-existing conditions

If Healthy Texas may work for you, the next step is to get a price quote at HealthCare.gov. This is a government operated Web site that allows small businesses to bypass brokers. Do-it-yourselfers who want a little bit of professional guidance through OnlineNavigator.org. If you are not so sure see the article "Alternatives to the Healthy Texas" should be considered in cases where one or more of the disadvantages poses an obstacle.

We anticipate the Healthy Texas program will be attractive to small firms with high risk employees but more affluent, healthy individuals will continue to find better insurance values in traditional health insurance.

Freedom Benefits does not provide enrollment support for Healthy Texas plans. To get a quote for Healthy Texas, go to www.HealthCare.gov . For independent professional help see www.OnlineNavigator.org .


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This web site is independently owned and managed by Tony Novak operating under the trademarks "Freedom Benefits", "OnlineAdviser" and "OnlineNavigator". Opinions expressed are the sole responsibility of the author and do not represent the opinion of any other person, company or entity mentioned. Tony Novak is not an agent, broker, producer or navigator for any federal or state health insurance exchange but may provide uncompensated advice, reviews and referrals to these official resources. Novak is compensated as an accountant, adviser, affiliate consultant, marketer, reviewer, endorser, producer, lead generator or referrer to some of the other commercial companies listed on this site. Information is from sources believed to be reliable but cannot be guaranteed.