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You are here: www.tdi.texas.gov . health . lhcoopdefintyps

Types of Cooperatives

The Texas Legislature has enacted three bills that allow employers to form cooperatives for the purchase of employer health benefit plans in Texas. All three types of cooperatives are private purchasing cooperatives under law. Texas Insurance Code Chapter 1501, Subchapter B provides for the formation of Purchasing Cooperatives. Two of the three have special characteristics; for clarity, we will refer to the broader category as "private purchasing cooperatives."

  1. Private Purchasing Cooperative -
    • HB 2055, enacted by the 73rd Texas Legislature (1993), initially authorized private purchasing cooperatives in Texas.
    • Two or more small or large employers may form a private purchasing cooperative for the purchase of small or large employer health benefit plans.
    • A cooperative may limit its membership for a variety of reasons, but may not do so due to the health status or experience of an employer or employee.
    • An original private purchasing cooperative is considered a single small employer solely for the purpose of benefit elections. This means that the private purchasing cooperative may act as the employer when choosing the type of plan, cost-sharing provisions, and any optional benefits to be purchased.
    • An original private purchasing cooperative is not considered a single small employer for the purposes of issuance of coverage or rating. This means that the private purchasing cooperative is not guaranteed issuance of coverage in the same manner as a small employer and carriers may rate employers purchasing coverage through the cooperative separately.
    • Employers may experience savings when purchasing coverage through a private purchasing cooperative due to larger group size factors, volume of purchases, and potential administrative savings for the carrier.
    • For more information on forming or joining a private purchasing cooperative, please choose the appropriate link: Joining - Forming.
  2. Small Employer Health Coalition -
    • HB 897, enacted by the 78th Texas Legislature (2003), created this special type of private purchasing cooperative made up of only small employers.
    • A small employer health coalition may limit its membership for a variety of reasons, but it may not do so due to the health status or experience of an employer or employee.
    • A small employer health coalition that meets the statutory definition of a small employer (2-50 employees) is treated as a single small employer. This means that the small employer health coalition is guaranteed issuance of coverage and will be rated as a single small employer rather than each employer member of the coalition being rated separately.
    • Small employers with fewer employees may experience savings as a result of the coalition's larger group size factor.
    • For more information on forming or joining a small employer health coalition, please choose the appropriate link: Joining - Forming.
  3. Health Group Cooperative -
    • SB 10, enacted by the 78th Texas Legislature (2003), created health group cooperatives.
    • Any person, other than a health carrier, may form a health group cooperative.
    • Once a health group cooperative is formed, it must have at least ten employer members to be eligible to purchase coverage from a health carrier that is participating in the health group cooperative market.
    • A health group cooperative must be composed of small, large or small and large employers.
    • A health group cooperative may restrict membership to employers within a single industry grouping as defined by the most recent edition of the United States Census Bureau's North American Industry Classification System.
    • Any small employer in the health group cooperative's service area may join a small employer health group cooperative and enroll in coverage upon the next open enrollment period.
    • A health group cooperative has discretion to allow a large employer in the same service area to join and enroll in health benefit plan coverage.
    • A health group cooperative may file an election to allow eligible single-employee businesses to join the cooperative and enroll in health benefit plan coverage.
    • Employers that join a health group cooperative must commit to purchasing coverage through the cooperative for two years, but may cease purchasing coverage upon demonstrating financial hardship.
    • A health group cooperative may grow to any size, yet is still considered to be a single large employer for the purposes of issuance of coverage and rating. Accordingly, a health group cooperative may purchase coverage from any health carrier participating in the health group cooperative market that is not already providing coverage to a health group cooperative in that county.
    • Health carriers providing coverage to a health group cooperative may offer a health benefit plan, specifically allowed by SB 10, which does not include state mandated benefits. This freedom from state mandates is specific to SB 10, but it is similar to that which authorizes consumer choice health benefit plans.
    • The flexibility in plan design for a health group cooperative, as well as the opportunity to group large numbers of employers together for rating purposes provides an opportunity for savings when purchasing coverage through a health group cooperative.
    • A health group cooperative may file an election to treat participating employers separately for rating purposes.
    • For more information on forming or joining a health group cooperative, please choose the appropriate link: Joining - Forming.
  4. Health Group Cooperative - Sub (p)
    • SB 805, enacted by the 79th Texas Legislature (2005), created a new type of health group cooperatives with special rights and requirements.
    • Any person, other than a health carrier, may form a sub (p) health group cooperative.
    • Once a sub (p) health group cooperative is formed, it must have at least ten small employer members to be eligible to purchase coverage from a health carrier that is participating in the health group cooperative market.
    • A sub (p) health group cooperative is not required to allow a small employer to join the cooperative if the cooperative has elected to restrict membership in the cooperative in accordance with legal requirements, and after the small employer has joined the cooperative, the total number of eligible employees employed on business days during the preceding calendar year by all small employers participating in the cooperative would exceed 50.
    • A health group cooperative must make the election to restrict membership at the time the cooperative is initially formed.
    • Employers that join a sub (p) health group cooperative must commit to purchasing coverage through the cooperative for two years, but may cease purchasing coverage upon demonstrating financial hardship.
    • A sub (p) health group cooperative is considered to be a single small employer for the purposes of issuance of coverage and rating. Accordingly, a health group cooperative may purchase coverage from any small employer health carrier that is not already providing coverage to a health group cooperative in that county.
    • Health carriers providing coverage to a sub (p) health group cooperative may offer a health benefit plan, specifically allowed by SB 10, which does not include state mandated benefits. This freedom from state mandates is specific to SB 10, but it is similar to that which authorizes consumer choice health benefit plans.
    • For more information on forming or joining a sub (p) health group cooperative, please choose the appropriate link: Joining - Forming.


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Last updated: 09/06/2014

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