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HMO nonrenewal, cancellation, and enrollment

Lesson 92 of 93 · All lessons · Up next: HMO out-of-network claims →

Three different endings, three different rules

When an HMO relationship ends in Texas, the first question is always which relationship is ending. Chapter 843 treats these differently:

  1. One enrollee's coverage is cancelled while the plan and the group contract stay in force.
  2. The plan or contract is not renewed at the end of its term, or the HMO discontinues a product.
  3. The group contract terminates, which ends coverage for everyone enrolled under it.

A producer who blurs these together will give the wrong answer about notice, about the reason that must be stated, and about what the enrollee can do next.

A left-to-right flow diagram titled Texas H M O, enrollment in, three ways out. On the far left, a blue box labeled Enrollment lists three requirements: the person must be eligible under a group or individual contract; must live, reside, or work in the health maintenance organization's service area; and must receive an evidence of coverage document. An arrow leads right to a green box labeled Coverage in force. From that green box, three arrows fan out to the right into three stacked boxes. The top yellow box, numbered one, is Cancel one enrollee, permitted only on grounds Chapter 843 allows, such as nonpayment, fraud or material misrepresentation, loss of eligibility, moving out of the service area, or documented misuse, and it notes that health status is not a permitted ground. The middle orange box, numbered two, is Nonrenew or discontinue plan, described as an end-of-term, class-level decision under the contract terms, applied uniformly, with written notice so members can replace coverage. The bottom pink box, numbered three, is Group contract terminates, where enrollee coverage ends with the contract it was written under and continuation or conversion terms in the evidence of coverage control. An arrow drops from these branches into a wide gray box at the bottom labeled Every exit shares these steps, which lists written notice stating the reason and the date coverage ends, the enrollee's access to the H M O complaint and appeal system, and checking the grace period plus continuation and conversion terms before promising anything.
Enrollment requirements feed coverage in force; three distinct exits (enrollee cancellation, plan nonrenewal, group contract termination) all funnel into notice and appeal rights.

Cancelling a single enrollee

An HMO in Texas cannot simply decide it no longer wants a member. Chapter 843 limits cancellation and refusal to renew of an enrollee's coverage to the grounds the statute allows. The recurring themes in those grounds are:

  • Nonpayment of premiums or other amounts the enrollee owes under the contract, after any grace period stated in the evidence of coverage;
  • Fraud or intentional material misrepresentation in applying for or using coverage;
  • Loss of eligibility, including no longer qualifying as an employee or dependent under a group contract;
  • No longer living, residing, or working in the HMO's approved service area, since an HMO's delivery network is geographically defined;
  • Documented material misuse of the plan, its providers, or its facilities.

Notice what is not on that list: a change in the enrollee's health, a claims history, or the cost of the enrollee's care.

Nonrenewal and discontinuance

Nonrenewal is a decision made at the end of a contract term rather than mid-term. When an HMO nonrenews or stops offering a plan, the decision must rest on the contract terms and be applied consistently to the class affected — not enrollee by enrollee based on who is sick. Written notice to the contract holder, and through the contract holder to enrollees, is the mechanism the statute relies on so that members can arrange replacement coverage before the coverage date lapses.

Cancellation asks "may this person be removed?" Nonrenewal asks "must this contract be continued?" Those are separate tests.

Enrollment

Enrollment is the mirror image. To enroll, a person must be eligible under the group or individual contract and must live, reside, or work in the HMO's service area. At enrollment the HMO must deliver an evidence of coverage that spells out benefits, limitations, copayments, the service area, the grace period, and the terms on which coverage may be cancelled or nonrenewed — so the enrollee learns the cancellation rules before, not after, a dispute.

When coverage does end, direct the enrollee to the HMO's complaint and appeal system and to any continuation or conversion rights described in the evidence of coverage. Never tell a client that services rendered after the cancellation date will be paid, and never accept premium as a way to "restore" a cancelled contract without the HMO's written reinstatement.

Key terms

Sample questions

Under Texas Insurance Code Chapter 843, which of the following is NOT among the grounds on which an HMO may cancel or refuse to renew an individual enrollee's coverage?

  • Nonpayment of premium or other amounts owed under the contract after any grace period stated in the evidence of coverage
  • Fraud or intentional material misrepresentation in applying for or using the coverage
  • A deterioration in the enrollee's health that has made the enrollee's care unusually expensive
  • Documented material misuse of the plan, its providers, or its facilities
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