How Does Small Business Group Health Insurance Work in Texas?

If you’ve started looking into group health insurance for your business, you’ve probably noticed how quickly a simple question turns into a pile of new ones.

How many employees do you need? How much does the business have to pay? What happens if some employees don’t want the coverage? And how do you know whether your employees’ doctors are actually in the network?

Most business owners are looking for the same thing: a health plan their employees can use at a price the company can live with.

Here’s how small business group health insurance works in Texas and what Plano and DFW employers should consider before choosing a plan.

What Counts as a Small Business in Texas?

Under Texas insurance rules, a small employer generally has between two and 50 employees. Federal programs sometimes count employees differently, so the number used for one rule may not be the number used for another.

Businesses with fewer than 50 full-time and full-time-equivalent employees usually aren’t required by federal law to offer health insurance. Many still choose to offer it because good benefits can make hiring easier and give employees another reason to stay.

If you offer a small-employer health plan in Texas, coverage generally must be available to employees who work at least 30 hours per week. Employees must also be allowed to enroll eligible dependents, although the employer doesn’t necessarily have to pay the dependent premium.

How Many Employees Have to Participate?

This is where some small-group quotes run into trouble.

Most Texas insurance companies want at least 75% of eligible full-time employees to participate in the plan. Employees who already have acceptable coverage through a spouse, another employer, Medicare, or another source usually don’t count against that percentage.

You don’t necessarily need every employee to enroll. You do need enough eligible employees to meet the insurance company’s participation requirement.

It’s worth talking with your employees before requesting final quotes. You don’t need to ask about anyone’s medical history. Just find out who is interested and who already has coverage somewhere else.

The Texas Department of Insurance has additional information about participation and eligibility for small-employer plans.

Does the Employer Have to Pay Part of the Premium?

Texas law doesn’t require every small employer to pay a set percentage of the premium. The insurance company, however, may have its own contribution requirement.

Many carriers require the employer to pay at least 50% of the employee-only premium. The exact requirement depends on the carrier and plan.

You have some choices in how you structure the contribution. A business might:

• Pay a percentage of each employee’s premium

• Contribute the same dollar amount for every employee

• Pay the employee’s full premium

• Contribute toward employee coverage but not dependent coverage

There’s no single formula that works for every company. A six-person accounting firm may approach benefits very differently from a 30-person construction company. The goal is to find a contribution the business can maintain—not just this month, but when the plan renews next year.

What Affects the Cost of Group Health Insurance?

Two Texas businesses with the same number of employees can receive very different quotes.

Group health insurance premiums can be affected by:

• The ages of participating employees

• Tobacco use

• The business location

• The number of employees enrolling

• The provider network

• The deductible and copay structure

• The amount the employer contributes

• Whether employees enroll spouses or children

An employee’s current health condition generally can’t be used to deny small-group coverage or increase that employee’s individual rate.

The monthly premium is important, but it doesn’t tell the whole story. A lower-priced plan may come with a larger deductible, fewer doctors, higher prescription costs, or no out-of-network coverage. A cheap plan can become expensive quickly if employees can’t use the doctors they already know or have to pay most routine expenses themselves.

PPO, HMO, EPO or High-Deductible Plan?

The alphabet soup can make this part feel more complicated than it needs to be.

PPO

A PPO usually gives employees more freedom when choosing doctors and specialists. Some PPO plans include out-of-network benefits. That added flexibility often comes with a higher premium.

HMO

An HMO normally requires employees to stay within a specific network. Employees may need to choose a primary care doctor and get referrals before seeing certain specialists. HMOs can cost less, but the network needs to work for your employees.

EPO

An EPO also relies on a provider network, but it may not require referrals in the same way as an HMO. Except for emergencies, care received outside the network usually isn’t covered.

High-deductible health plan

A high-deductible plan can reduce the monthly premium, but employees pay more before the insurance company begins sharing costs. Some plans can be paired with a Health Savings Account, or HSA.

None of these plan types is automatically better than the others. The better choice is the one that fits your employees, budget, and preferred doctors.

What About Level-Funded Health Plans?

Some small businesses may also want to look at a level-funded plan. You pay a set amount each month that normally includes estimated employee claims, administrative expenses, and stop-loss insurance.

If claims are lower than expected, the employer may receive part of the unused claims money back, depending on the contract. If claims run higher, stop-loss coverage can help limit the employer’s exposure.

Level-funded plans can offer savings, but they’re more complicated than traditional fully insured coverage. Before choosing one, review the maximum financial responsibility, stop-loss protection, refund rules, renewal terms, and what happens to claims after the plan year ends. They can be a good fit for some businesses, but they aren’t automatically the best choice.

Pay Attention to the DFW Provider Network

Provider networks are especially important for North Texas businesses.

Your office may be in Plano while employees live in Dallas, Frisco, Allen, Richardson, McKinney, Garland, or elsewhere in DFW. A network that works well near the office might not be convenient for everyone.

Before choosing a plan, check the doctors, urgent care centers, specialists, and hospitals employees are likely to use. If access to a particular hospital system matters, verify the actual facility and doctor rather than assuming the entire system participates.

Provider agreements can change, so it’s wise to check important doctors directly before employees enroll.

What Does a Small-Group Plan Cover?

ACA-compliant small-group plans generally include coverage for:

• Preventive care

• Primary care and specialist visits

• Emergency services

• Hospital stays

• Prescription medications

• Maternity and newborn care

• Mental health services

• Laboratory services

• Pediatric care

Employees with pre-existing conditions can’t be denied ACA-compliant small-group coverage because of their medical history.

Keep in mind that “covered” doesn’t mean every service is free. Deductibles, copays, coinsurance, network rules, and other plan terms still apply. That’s why it’s important to review how employees will actually use the plan—not just the list of covered benefits.

Could Your Business Receive a Tax Credit?

Some smaller employers may qualify for the federal Small Business Health Care Tax Credit.

Eligibility is based on several factors, including:

• Having fewer than 25 full-time-equivalent employees

• Paying average wages below an annually adjusted limit

• Contributing at least 50% of employee-only premiums

• Offering qualifying coverage through SHOP

The maximum credit can equal 50% of qualifying premiums paid by an eligible for-profit employer or 35% for an eligible tax-exempt organization. The credit is normally available for two consecutive tax years.

The rules can get complicated, so check with your accountant before building the credit into your benefits budget. You can also review the current requirements in the IRS Small Business Health Care Tax Credit guide.

What Should You Compare Before Choosing a Plan?

Don’t choose based on the premium alone. Before signing up, ask:

• Are the doctors and hospitals our employees use in the network?

• What will employees pay before the plan begins sharing costs?

• How are common prescriptions covered?

• Are referrals required for specialists?

• What is the annual out-of-pocket maximum?

• How much will the company pay?

• What will employees pay to cover family members?

• What happens when the plan renews?

• Who will help with enrollment questions and plan changes?

Those answers will tell you much more than the monthly premium by itself.

Common Questions From Texas Employers

Can a business owner enroll in the company plan?

A business owner can usually enroll when at least one eligible employee also enrolls. Carrier requirements and business ownership structures can affect eligibility.

Can a business start group health insurance at any time?

Group plans can often begin at different times during the year. Participation requirements, carrier deadlines, and enrollment rules may affect the available start date.

Can an employee be denied because of a pre-existing condition?

An employee can’t be denied ACA-compliant small-group coverage because of a pre-existing condition. The plan’s deductibles, network rules, copays, and covered-service requirements still apply.

Getting Help Comparing Texas Group Health Plans

You don’t have to sort through every network, deductible, and contribution option on your own.

Insurance Crib Insurance Agency helps businesses compare available group health plans from multiple insurance carriers. We’ll look at your number of employees, budget, provider preferences, and contribution goals before walking you through the options.

We serve employers in Plano, Dallas–Fort Worth, and throughout Texas. Our job is to explain what you’re buying in plain English so you can choose a plan that works for both your business and your employees.

If you’re looking for group health insurance for your Texas business, call or text 469-300-0271 or contact Insurance Crib Insurance Agency.

Plan availability, benefits, carrier requirements, and eligibility rules vary. This article provides general information and isn’t legal, tax, or accounting advice.

Insurance Crib Insurance Agency Plano, Dallas & North Texas

We are an independent insurance agency offering auto, home, health, life, general liability, business and commercial auto insurance.

We serve families, businesses and commercial clients throughout the DFW Metroplex, including Plano, Dallas, Wylie, Frisco, Allen, and Richardson. As an independent broker, we shop and compare coverage options across multiple insurance carriers to find the right policy for your specific needs.

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