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Texas Department of Insurance
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Small employer health insurance guide

Some small employers in Texas offer health insurance to their employees.

Note: Texas insurance law defines a small employer as a business with two to 50 employees, regardless of how many hours the employees work.

If you provide health insurance, you must offer it to all your employees who work 30 hours or more each week. You must also offer coverage for their dependents. Business owners can enroll in their small-employer health plan if at least one of their employees also enrolls.  

You must give new employees at least 31 days from their start date to enroll in your health plan. If they don’t enroll during this period, you can require them to wait for the next open enrollment period to join. Some employees might have a special enrollment period if they have a life change, like getting married, having a baby, or adopting a child.

You can require employees to wait up to 90 days after they enroll in the health plan for their coverage to start. The insurance company may not charge a premium during this period.

Learn more: How to shop smart for insurance

Paying premiums

The law doesn't require you to pay an employee’s health plan premiums. But your insurance company might require you to pay at least 50% of your employees’ premiums. You may pay a higher percentage if you want to.

Insurance companies may raise premiums because of changes in health care costs, the age of your employees, or employee tobacco use. They can’t raise premiums because of your employees’ health, though.

Coverage and benefits

Federal law requires small-employer plans to cover 10 types of health care services, called essential health benefits. Plans bought before March 23, 2010, and some plans bought before October 1, 2013, aren't required to cover the essential health benefits.

Texas also requires some plans to include certain benefits. Learn more on our Mandated health benefits page.

Insurance companies can’t deny or limit coverage to employees with preexisting conditions.

Workers' compensation insurance

Most employee health plans won’t pay for work-related injuries or illnesses. For that, you’ll need a separate workers’ compensation insurance policy.

Workers’ compensation insurance pays medical costs some lost wages for employees who have work-related injuries or illnesses. It won’t pay for non-work-related injuries and illnesses or for routine health care.

Texas law doesn’t require you to have workers’ compensation insurance. But if you have it, you’ll be legally protected from some lawsuits and damage awards. For more information, read our Workers' compensation insurance guide.

Learn more: Workers' compensation insurance guide.

Shopping for coverage

You can buy health insurance directly from an insurance company or agent.

Most insurance companies require at least 75% of your full-time employees to participate in your health plan. Employees who have other health coverage don’t count toward your participation percentage.

You can buy coverage any time during the year. But if you don’t meet the 75% participation requirement, an insurance company can make you wait until the open enrollment period to buy coverage. The open enrollment period is from November 1 through December 15 each year.

Shopping tips

These tips can help you find the best value for your money:

  • Understand how cost-sharing works.  Some plans will pay for 80% of a covered service, while others will pay 70%. Your employees must pay the rest. Plans that require an employee to share a higher percentage of the cost of services will have lower premiums, but could cost your employees more in the long run. Plans with higher deductibles also usually have lower premiums, but employees will have to pay more out-of-pocket before the health plan pays.
  • Consider factors other than cost, such as a company's financial strength and complaint record. You can learn a company's financial rating from an independent rating organization, and its complaint record by calling our Help Line or checking our website.
  • Buy only from licensed insurance companies.  If you buy from a company that doesn’t have a license, your employees' claims could go unpaid. You can learn whether a company has a license by calling our Help Line or by searching for the company on our website.

How companies set premiums

Your employees’ health won’t affect your rates. Insurance companies can’t deny or limit coverage to employees with preexisting conditions.

Insurance companies consider the following factors when setting your premiums:

  • Age of your employees. Plans use a formula set by federal regulation when factoring age into premium amounts. The premium for an employee who is 64 will be three times higher than the premium for an employee who is 21.
  • Tobacco use. Federal law allows health plans to charge tobacco users up to 50% more. The higher rate is spread among all the group’s members.
  • Geographic area. Health care costs vary by region because of differences in the cost of living and the number of providers in the area.
  • Type of plan you choose. Plans can differ on how your employees get care. For instance, some plans might require your employees to use doctors and providers in the health plan’s network. Other plans might let them go to any doctor or provider they choose. In general, plans that have fewer health care providers to choose from will have lower premiums.

Keeping coverage after employees leave

Under state and federal law, most employees have the option to keep their coverage for a while after they leave their job. You must tell employees about how they can keep their coverage.

Former employees who keep their coverage pay the full cost of the plan. You don’t have to pay anything toward their premiums.

The federal COBRA law applies to employers with 20 or more employees. The state continuation law applies to employers of any size.



Question? Call us at 800-252-3439.

Last updated: 1/12/2022