Texas Discount Health Care Program Operator Bond: A Comprehensive Guide

February 17, 2022

Texas Discount Health Care Program Operator Bond

This guide provides information for insurance agents to help their customers obtain a Texas Discount Health Care Operator bond

At a Glance:

  • Average Cost: Between $500 to $3,750 per year based on the applicant’s credit
  • Bond Amount: $50,000
  • Who Needs it: All discount health care program (DHCP) operators in Texas
  • Purpose: To ensure the public will receive compensation for financial harm if the DHCP operator violates registration law
  • Who Regulates Discount Health Care Program Operators in Texas: The Texas Department of Insurance

Background

Texas statute 562.053 requires all DHCP operators that conduct business in the state to register with the Department of Insurance. The Texas legislature enacted the registration laws and regulations to ensure that DHCP operators engage in ethical business practices. To provide financial security for the enforcement of the registration law, DHCP operators must purchase and maintain a $50,000 surety bond to be eligible for registration.

What is the Purpose of the Texas Discount Health Care Program Operator Bond?

Texas requires DHCP operators to purchase a surety bond as part of the application process to obtain a business registration. The bond ensures that the public will receive compensation for financial harm if the operator fails to abide by the regulations set forth in Texas statute 562.103. Specifically, the bond protects consumers if the DHCP operator engages in any acts of fraud or fails to provide services that have been paid for. In short, the bond is a type of insurance that protects the public if the DHCP operator violates registration law.

Texas Discount Health Care Program Operator Bond Form

Texas Discount Health Care Program Operator Bond Form

How Can an Insurance Agent Obtain a Texas Discount Health Care Program Operator Surety Bond?

BondExchange makes obtaining a Texas Discount Health Care Program Operator bond easy. Simply log in to your account and use our keyword search to find the “discount” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

Is a Credit Check Required for the Texas Discount Health Care Program Operator Bond?

Surety companies will run a credit check on the operator to determine eligibility and pricing for the Texas Discount Health Care Program Operator bond. Operators with excellent credit and work experience can expect to receive the best rates. While operators with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the operator’s credit.

How Much Does the Texas Discount Health Care Program Operator Bond Cost?

The Texas Discount Health Care Program Operator bond can cost anywhere between $500 to $3,750 per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the bond cost on the $50,000 bond requirement.

$50,000 Discount Health Care Program Operator Bond Cost

Credit Score Bond Cost (1 year)
680+ $500
625 – 679 $750
575 – 624 $1,875
550 – 574 $2,500
500 – 549 $3,750

Who is Required to Purchase the Bond?

Texas requires all discount health care program operators to purchase a surety bond prior to obtaining a business registration. To paraphrase Texas statute 562.002, a discount health care program operator is an individual or business entity that runs an organization that provides members with discounts to health care services through providers that the organization contracts with.

How Do Texas Discount Health Care Program Operators Apply for a Registration?

DHCP operators in Texas must navigate several steps to obtain a registration. Below are the general guidelines, but applicants should refer to the application form for details on the process.

Registration Period – All Texas Discount Health Care Program Operator Registrations are valid for one year from the date of issuance and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

DHCP operators must purchase and maintain a $50,000 surety bond. Insurers that hold a Certificate of Authority are exempt from the surety bond requirement.

Step 2 – Complete the Application

All DHCP operator registration applications should be mailed to the following address:

Texas Department of Insurance
Agent and Adjuster Licensing, Mail Code CO – AAL
P.O. Box 149104
Austin, TX 78714-9104

Operators must complete the application in its entirety, and submit the following items:

    • Biographical certificates for each company owner and officer
    • Copies of all contracts used with providers or provider networks
    • List of all marketers authorized to sell or distribute the discount health care program under the operator’s name
    • Copy of the operator’s charter, Certificate of Authority, or proof of registration with the Texas Secretary of State

Operators must pay a $1,000 fee when submitting their application.

How do Texas Discount Health Care Program Operators Renew Their Registrations?

The Department of Insurance will send the operator a renewal notice 60 days before the operator’s registration expires. The operator must return the completed renewal notice, accompanied by a $500 renewal fee, to the following address:

Texas Department of Insurance
Licensing Division, MC-9999
P.O. Box 149104
Austin, Texas 78714-9104

All Texas Discount Health Care Program Operator Registrations are valid for one year from the date of issuance and must be renewed before the expiration date.

What are the Insurance Requirements for Discount Health Care Program Operators in Texas?

Texas does not require DHCP operators to obtain any form of liability insurance as a prerequisite to obtaining a business registration. DHCP operators must purchase and maintain a $50,000 surety bond. Insurers that hold a Certificate of Authority are exempt from the surety bond requirement.

How Do Texas Discount Health Care Program Operators File Their Bond?

DHCP operators should mail their completed bond form, including the power of attorney, to the following address:

If your customer is using the USPS

Texas Department of Insurance
Agent and Adjuster Licensing, Mail Code CO – AAL
P.O. Box 149104
Austin, TX 78714-9104

If your customer is using either UPS or FedEx

Texas Department of Insurance
Attn: Lockbox Department
208 E. 10th St, MC: CO-AAL
Austin, TX 78711

The surety bond requires signatures from both the surety company that issues the bond and from the operator. The surety company should include the following information on the bond form:

  • Legal name and address of entity/individual(s) buying the bond
  • Surety company’s name and address
  • Date the bond goes into effect
  • Date the bond is signed

What Can Texas Discount Health Care Program Operators Do to Avoid Claims Against Their Bonds?

To avoid claims made against their bonds, DHCP operators must follow all registration regulations in the state, including some of the most important issues below that tend to cause claims:

  • Do not engage in any acts of fraud
  • Do not breach any contracts made with consumers
  • Provide all services that have been paid for

What Other Insurance Products Can Agents Offer Discount Health Care Program Operators in Texas?

Texas does not require DHCP operators to purchase any form of liability insurance as a prerequisite to obtaining a business registration. However, most reputable businesses will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for Texas Discount Health Care Program Operator Customers?

Texas conveniently provides a public database to search for active DHCP operators in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

2022-03-21T11:29:17-04:00