1. (a) An employee, member, or dependent eligible for conversion or continuation shall have the following options:

   1. (1) For group policies issued, delivered, or renewed prior to June 1, 1996, the insurer shall first offer to each eligible employee, member, or dependent, a conversion policy with the same coverage and benefits as the terminating group coverage. Evidence of insurability shall not be required.

   2. (2) For group policies issued or delivered on or after June 1, 1996, the insurer shall first offer to each eligible employee, member, or dependent, a conversion policy with coverage and benefits similar to those of the terminating group coverage. Evidence of insurability shall not be required. For the purposes of this subsection, similar coverage and benefits means:

      1. (A) the same coverage and benefits as provided by the terminating group coverage; or

      2. (B) for hospital, surgical, medical, and major medical expense coverage and benefits as provided by the Standard Conversion Policy Benefit Package (Form Number 369SC-BP)(Figure Number 1) prescribed in §3.515 of this title (relating to Prototype Forms and Required Conversion Benefit Packages) and found in §3.520 of this title (relating to Appendix). If the group policy from which the employee, member, dependent is converting contains benefits for chemical dependency, mental illness, or out-patient prescription drugs, the insurer shall attach to the converted policy the following riders, which are prescribed in §3.515 of this title (relating to Prototype Forms and Required Conversion Benefit Packages) and found in §3.520 of this title (relating to Appendix); however, nothing herein shall be construed to require a rider for benefits which were not contained in the group policy:

         1. (i) Alcohol and Drug Abuse Benefit Rider (Form Number 369CONV-ADB) (Figure Number 2);
         2. (ii) Mental Health Benefit Rider (Form Number 369CONV-MHB) (Figure Number 3); or
         3. (iii) Prescription Drug Benefit Rider (Form Number 369CONV-RX) (Figure Number 4).

      3. (C) As an exception to subparagraph (B) of this paragraph, for in-hospital expense policies, the coverage and benefits as provided by the In-Hospital Conversion Policy Benefit Package (Form Number 369IHC-BP) (Figure Number 5) prescribed in §3.515 of this title (relating to Prototype Forms and Required Conversion Benefit Packages) and found in §3.520 of this title (relating to Appendix). If the group policy from which the employee, dependent, or member is converting contains benefits for chemical dependency, mental illness, or outpatient prescription drugs, the insurer shall attach to the converted policy the following riders, which are prescribed in §3.515 of this title (relating to Prototype Forms and Required Conversion Benefit Packages) and found in §3.520 of this title (relating to Appendix); however, nothing herein shall be construed to require a rider for benefits which were not contained in the group policy:

         1. (i) Alcohol and Drug Abuse Benefit Rider (Form Number 369CONV-ADB) (Figure Number 2);
         2. (ii) Mental Health Benefit Rider (Form Number 369CONV-MHB) (Figure Number 3); or
         3. (iii) Prescription Drug Benefit Rider (Form Number 369CONV-RX) (Figure Number 4).

   3. (3) Upon written rejection of the coverage and benefits described in paragraphs (1) or (2) of this subsection, any employee, member, or dependent eligible for conversion, may elect lesser coverage. For purposes of this subsection, lesser coverage means:

      1. (A) For major medical and hospital, medical, or surgical policies, the coverage and benefits as provided by the Basic Conversion Policy Benefit Package (Form Number 369BC-BP) (Figure Number 6) as prescribed in §3.515 of this title (relating to Prototype Forms and Required Conversion Benefit Packages) and found in §3.520 of this title (relating to Appendix).
      2. (B) As an exception to subparagraph (A) of this paragraph, for in-hospital expense only policies or for policies providing coverage and benefits equivalent to or lesser than those provided by the Small Employer Basic Coverage Benefits Plan promulgated by the department and found in Figure Numbers 14 or 15 and in 16, 17, and 18 in the Appendix to Chapter 26 of this title (relating to Small Employer Health Insurance Regulations), lesser coverage is the Lesser In-Hospital Conversion Policy Benefit Package (Form Number 369LIHC-BP) (Figure Number 7) as prescribed in §3.515 of this title (relating to Prototype Forms and Required Conversion Benefit Packages) and found in §3.520 of this title (relating to Appendix).
   4. (4) Any eligible employee, member or dependent may choose continuation under the group policy in lieu of a conversion policy. If this option is selected, continuation shall be permitted for a minimum of six months, subject to the termination provisions of §3.514 of this title (relating to Minimum Standards for Continuation of Coverage).
   5. (5) In addition to the conversion benefit packages required by this section, an insurer may offer other conversion benefit plans at its option. Other conversion benefit plans may only be offered after written rejection of the benefits described in paragraphs (1) and (2) of this subsection and the offering of the lesser coverage provided in paragraph (3) of this subsection. Other conversion benefit plans must provide benefits greater than the Minimum Standards for Benefits for Other Conversion Policies, as described in §3.510 of this title (relating to Minimum Standards for Benefits for Other Conversion Policies). Such other conversion plans must be filed with and approved by the Department prior to use.
2. (b) An insured shall have the option to convert or continue insurance as described in this subchapter, upon completion of any continuation of coverage provided under The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) (Public Law Number 99-272, 100 stat. 222) and any amendments thereto. The conversion option must be offered by the insurer to the employee, member, or dependent prior to the expiration of the COBRA continuation coverage.
3. (c) A dependent shall have the option to convert his insurance as described in this subchapter upon completion of any continuation of coverage provided under Insurance Code, Article 3.51-6, §3B.
4. (d) Insureds entitled to an extension of benefits under Insurance Code, Article 3.51-6A, §5 shall again be entitled to a conversion policy in accordance with all requirements of this subchapter at the end of the extension period.

Source Note:The provisions of this §3.505 adopted to be effective December 30, 1993, 18 TexReg 9759; amended to be effective July 3, 1996, 21 TexReg 5857.