Small business health insurance in Texas
Navigating the complexities of health insurance can be challenging for small businesses in Texas. As a hub of entrepreneurship and a growing technology sector, small businesses need to do everything they can to attract and retain top talent, including offering health benefits to their employees.
Learn what your health benefit options are and how PeopleKeep can help you offer an affordable and personalized health reimbursement arrangement (HRA) your employees will love.
Texas small business health insurance information
Knowing what health insurance options are available to small businesses in Texas is essential for finding a health benefit your employees will love. Without the right benefits, your employees may leave for companies with better offerings. The Lone Star State has numerous options you can choose from and tailor to your workers’ diverse needs.
This guide to small business health insurance in Texas explores the importance of offering health coverage to employees, the options available, and alternatives to group coverage that empower employers and employees alike.
Topics covered in this guide include:
Overview of small business health insurance in Texas
In Texas, small businesses looking to offer health insurance to their employees have many options to consider. While considering business health insurance plans, it’s important to weigh premiums, network care, out-of-pocket costs, and the quality of care your employees will receive.
You’ll want to ensure your employees have access to quality health insurance coverage. This shows you’re invested in their health and well-being and helps create a positive work environment where your employees want to be.
Employers in Texas can select from various coverage types, including health maintenance organizations (HMOs), preferred provider organizations (PPOs), exclusive provider organizations (EPOs), and point of service (POS) plans. With so many variations, it’s easy to see why traditional group health insurance remains a staple for businesses.
However, many small organizations can’t afford to offer a group plan thanks to expensive premiums and annual rate increases. You also may not meet the plan’s minimum requirements, leaving many small businesses without a health benefit. Thankfully, you can offer a defined contribution plan like a health reimbursement arrangement (HRA). Employers can leverage this versatile alternative to reimburse employees tax-free for their qualifying medical expenses and individual health insurance premiums.
Understanding all of the options available to your organization is essential for making an informed decision about health insurance benefits.
Importance of small business health insurance
Health insurance is a critical factor for small businesses to consider, affecting both the quality of care available to employees and the overall health of the business. Here’s why you should offer health benefits to your team.
The ACA employer mandate
Under the Affordable Care Act’s employer mandate, organizations with 50 or more full-time equivalent employees (FTEs) must offer affordable health insurance coverage to at least 95% of their full-time employees and dependents. This insurance must meet minimum essential coverage (MEC) standards.
If you fail to offer affordable coverage and at least one full-time employee gets a subsidy on the individual health insurance market, you could face steep penalties. You could also face penalties as an applicable large employer (ALE) if your employer-sponsored coverage doesn’t pay for at least 60% of the covered healthcare expenses for the standard population. This is known as minimum value.
While this federal mandate isn’t specific to Texas, ALEs in the state must comply. This ensures more Americans have access to health coverage. If you have fewer than 50 FTEs, you don’t need to offer health coverage. However, it’s in your best interest to do so.
Benefits of providing health insurance to employees
Offering health insurance to employees comes with many benefits beyond federal compliance.
Providing health benefits can offer numerous advantages, including the following:
- Attract and retain employees
- Tax advantages
- Improved wellness and productivity
For smaller Texas businesses vying to attract and keep top-notch talent, offering health insurance is an essential strategy. Candidates frequently expect such benefits and may weigh them heavily when deciding on job offers.
According to PeopleKeep’s 2024 Employee Benefits Survey, 81% of employees said an employer’s benefits package is an important factor in whether they accept a job. Furthermore, we found that 92% of employees value health benefits.
Not offering a health benefit could lead to top candidates declining your job offer or have your current employees looking for new opportunities.
Offering health benefits also has tax advantages. Organizations may be able to deduct the portion of premiums they pay for employees and any contributions to health savings accounts (HSAs). Employees also share in these savings, with most employees paying for premiums with pre-tax deductions. This reduces their taxable income and, therefore, tax liability.
Moreover, health insurance contributes to employee wellness—employees can more readily access necessary healthcare services, engage in preventative measures, and often experience fewer sick days, all of which boost productivity.
By providing health benefits, businesses not only foster a healthier, more engaged workforce but enhance their reputation as employers of choice.
Small business health insurance options in Texas
In Texas, small business owners have multiple avenues to provide health coverage for their employees, each with distinct advantages and considerations. Navigating these options can be overwhelming for small employers. We’ll break down your options so you can weigh the advantages and disadvantages.
Some of the options available to small businesses include:
- Traditional group health insurance
- Health reimbursement arrangements (HRAs)
- Supplemental and ancillary benefits, like dental and vision insurance
Group health insurance in Texas
Small businesses in Texas select group health plans due to their familiarity and the ability to provide employees with essential health benefits and large networks of doctors. Employers share the cost of premiums with their employees, often covering a larger portion of the cost. This can lead to more affordable coverage for employees.
According to KFF, employers covered, on average, 83% of their employees’ self-only premiums and 72% of family insurance premiums in 2023.
Group plans typically require at least 70% of your employees to opt into coverage. In Texas, 75% of employees must enroll in your group plan or have coverage from another source. Otherwise, you can’t offer the plan.
There are four main types of group plans:
- Preferred provider organization plans (PPOs): The most common type of plan is a PPO. It gives policyholders a network of preferred providers who provide care at a lower price. Members can seek care outside of the network, but often at a higher cost.
- Health maintenance organization plans (HMOs): HMOs offer a wide range of healthcare services through a network of providers that either contract exclusively with the HMO or agree to provide discounted services. Members must select a primary care physician (PCP) and get referrals to see a specialist.
- Exclusive provider organization plans (EPOs): An EPO combines the preferred provider network of an HMO with the freedom of seeing a specialist without a referral that a PPO offers. However, these plans don’t cover care from out-of-network providers.
- Point of service plans (POSs): With a POS plan, you pay less if you see in-network doctors and specialists. Like an HMO, you need a referral from a primary care doctor to see a specialist.
The employer-sponsored health insurance plan that’s best for you and your employees depends on what you want and how much you’re willing to spend. While group plans are the traditional route for offering benefits, they come with high costs for small employers. This is because small organizations don’t meet the minimum participation requirements or may have too small of a group to make the coverage affordable.
There’s another type of group plan with cheaper premiums. A high deductible health plan (HDHP) has lower premiums and higher deductibles than other types of plans. This means your employees must pay more out-of-pocket before the insurance company covers a portion of their costs. So, while it can benefit your budget as a business owner, it puts extra financial strain on your employees.
If an HDHP works for your business, there’s a way to help your employees with their out-of-pocket expenses. A group coverage HRA (GCHRA) allows you to reimburse your employees for their qualifying expenses tax-free, such as costs before they meet their deductible or copayments. This allows you to save money on premiums while helping employees with the extra cost of an HDHP.
Qualifying small businesses can also explore small group health insurance options and medical plans through the Small Business Health Options Program (SHOP) marketplace in most states. These plans are available to organizations with fewer than 50 FTEs. Those with fewer than 25 employees whose average annual employee salary is less than $56,000 may also qualify for the Small Business Health Care Tax Credit. Unfortunately, Texas has no on-SHOP exchange plans. However, there are small group plans available.
According to HealthCare.gov's rate review site, in 2024, the following companies offer small group health plans in Texas.
|
Insurance company |
Plans and plan type |
|
Baylor Scott & White Insurance Company |
ICSW PPO bronze, ICSW PPO silver, ICSW PPO gold |
|
Blue Cross Blue Shield of Texas |
Blue Choice PPO, Blue Advantage HMO, HMO In-Vitro, PPO In-Vitro |
|
Scott and White Health Plan |
SWHP HMO-Only bronze, SWHP HMO-Only silver, SWHP HMO-Only gold |
|
Integon National Insurance Company |
Small Group PPO, Small Group PPO with IVF |
|
Memorial Hermann Commercial Health Plan |
MHCHP Select HMO |
|
Memorial Hermann Health Insurance Company, Inc. |
Select |
|
UnitedHealthcare Insurance Company |
Choice Plus Essential, Choice Essential |
|
UnitedHealthcare of Texas, Inc. |
Choice Essential |
See how HRAs and group health insurance compare with our chart.
Taking advantage of individual health insurance with an HRA
Group health insurance is expensive for small employers. It doesn’t provide employers or employees with the flexibility they need to meet their needs, it’s difficult to offer, and it can become an administrative headache for human resources teams. That’s why many employers are offering alternatives to group plans.
Small businesses in Texas can implement a stand-alone HRA to reimburse their staff for their individual health insurance premiums and out-of-pocket medical expenses up to their set allowance amount. This arrangement grants employees the freedom to select the plan that best suits their individual or family needs. This means choosing a plan they can afford with the doctors they want instead of being forced into a one-size-fits-all group policy.
Employers save money by not offering a group plan and instead offering a fixed monthly allowance that fits their budget. HRAs have no minimum contribution requirements or participation requirements, and there's no need to pre-fund an account. Employers only pay when employees submit qualified medical expenses for reimbursement.
You can reimburse employees for their individual health insurance premiums with two types of HRAs:
- The qualified small employer HRA (QSEHRA): Congress established the QSEHRA in 2016 to allow organizations with fewer than 50 FTEs to reimburse their employees tax-free for qualifying out-of-pocket expenses and insurance premiums. Employees must have MEC to participate. This coverage can be through individual plans or from a spouse’s or parent’s group plan. Employers can differentiate allowances by family status, such as single or married. The IRS caps annual QSEHRA allowances. A QSEHRA is the perfect on-ramp for employers looking to offer their first health benefit.
- The individual coverage HRA (ICHRA): The ICHRA is for employers of all sizes, including ALEs. It works like a QSEHRA but offers employers more flexibility and customization. There’s no maximum contribution limit, so you can offer more than you can with a QSEHRA. You can also differ allowances and customize employee eligibility with 11 employee classes, like salaried or hourly employees. Employees must have a qualifying form of individual coverage to participate in the benefit.
By opting for this personalized and business-savvy approach to health insurance, small businesses in Texas are able to offer effective health benefits while controlling costs.
Learn more about PeopleKeep's HRA software
Qualified small employer HRA
A powerful alternative to group health insurance made specifically for small employers.
Individual coverage HRA
A health benefit that enables employers to cover the individual insurance plans their employees choose.
Group coverage
HRA
A health benefit that employers can use to help employees with their out-of-pocket expenses.
Supplemental and ancillary benefits
Beyond the primary small business health insurance plan options, Texas employers may consider enhancing their benefits packages with supplemental and ancillary coverage. These plans offer additional layers of protection by supplementing your group plan or providing coverage for items or services health insurance doesn’t cover.
These additional plans improve the overall quality of care for employees and can also distinguish your organization’s benefits package from competitors.
Our 2024 Employee Benefits Survey found that 91% of employees value dental insurance and 81% value vision insurance. While you can use an HRA to reimburse employees for their dental and vision expenses, there are other benefits you can offer.
Some common types of supplemental and ancillary benefits include the following:
- Critical illness insurance
- Vision insurance
- Dental coverage
- Health savings account (HSA)
- Flexible spending account (FSA)
The average cost of health insurance in Texas
In Texas, the cost of health insurance for small business employees varies based on factors such as coverage details, type of plan, age, your employees’ locations, and the plan’s actuarial value.
According to KFF’s 2023 Employer Health Benefits Survey, the average annual premium in the U.S. was $8,435 for single coverage and $23,968 for family coverage. This is roughly $702.92 and $1,997.33 per month, respectively. This shows the financial commitment offering a group health plan requires.
Offering an HRA allows you to set a monthly allowance so you can control your costs. You can then reimburse employees for their individual health insurance premiums. The table below shows the lowest-cost premiums for each metal tier for a 40-year-old in Texas who buys self-only individual health coverage at HealthCare.gov, according to KFF.
|
Average lowest-cost bronze premium |
Average lowest-cost silver premium |
Average benchmark premium (second-lowest-cost silver plan) |
Average lowest-cost gold premium |
|
$334 |
$468 |
$475 |
$409 |
The cost of individual plans can differ by age, location, insurance company, and metal tier. All plans on the public exchange provide MEC and cover the 10 essential health benefits.
What plans are available on the individual market in Texas?
Individuals and families with an HRA or those without an employer-sponsored plan have many options to choose from on the individual market in Texas. Since Texas doesn’t have a state-based exchange, residents can use the federal Health Insurance Marketplace at HealthCare.gov to find a policy.
According to the federal rate review site, these are the insurance carriers offering individual plans in the state:
|
Insurance company |
On- or off-exchange |
|
Aetna Health Inc. |
On- and off-exchange plans |
|
Baylor Scott & White Insurance Company |
Off-exchange |
|
Blue Cross Blue Shield of Texas |
On-exchange |
|
Celtic Insurance Company (Ambetter) |
On- and off-exchange plans |
|
CHRISTUS Health Plan |
On- and off-exchange plans |
|
Cigna HealthCare of Texas, Inc. |
On-exchange |
|
Community First Insurance Plans |
On-exchange |
|
Community Health Choice, Inc. |
On-exchange |
|
Imperial Insurance Companies, Inc. |
On-exchange |
|
Moda Health Plan, Inc. |
On-exchange |
|
Molina Healthcare of Texas, Inc. |
On-exchange |
|
Oscar Insurance Company |
On-exchange |
|
Scott and White Health Plan |
On- and off-exchange |
|
Sendero Health Plans, Inc. |
On-exchange |
|
Superior Health Plan (Ambetter) |
On-exchange |
|
UnitedHealthcare of Texas, Inc. |
On-exchange |
|
US HEALTH AND LIFE INSURANCE COMPANY |
On-exchange |
Individuals and families can enroll in a plan during the annual open enrollment period, which runs from November 1 through January 15 in Texas. You can only enroll in a plan outside of open enrollment if you experience a qualifying life event. This creates a special enrollment period (SEP).
Individuals and families may be eligible for federal premium tax credits to help them pay for their insurance premiums. However, these are only available for on-exchange plans.
For those in between coverage, short-term health insurance can bridge gaps, although it may not offer the same level of health benefits as standard health care services. Furthermore, federal programs like Medicaid provide coverage for eligible individuals, ensuring access to medical care for those who meet certain income requirements.
COBRA in Texas
So, what happens if an employee loses their employer-sponsored health coverage? The federal Consolidated Omnibus Budget Reconciliation Act of 1985 allows former employees and their eligible dependents to retain their group coverage if they experience a qualifying event.
Here’s how it works:
- Eligibility: Former employees who quit, retire, or you terminate for reasons other than gross misconduct may qualify for COBRA. Those with reduced hours may also qualify. Covered dependents may also be eligible for COBRA due to the death of an employee, divorce, the employee becomes eligible for Medicare, or if the dependent turns 26.
- Coverage duration: Up to 18 months, but eligible employees and dependents can extend this under certain circumstances.
- Applies to: All organizations with 20 or more FTEs
But, Texas has its own mini-COBRA law. Known as Texas law 151.51, this requires employers (even those with fewer than 20 employees) to continue to provide health coverage to employees who were insured for at least three months before termination. They must offer coverage for at least nine months after the qualifying event, which individuals can extend for an additional six months.
All monthly premium payments under COBRA are the individual’s responsibility, not the employer's. This encompasses both the employer’s and employee’s portion of premium contributions, in addition to an administrative charge.
How PeopleKeep can help Texas employers
If you’re ready to offer health benefits to your employees in Texas and beyond, PeopleKeep can help. Our HRA administration software makes it easy for small and mid-sized organizations to set up and manage their benefits in minutes each month.
You can design HRAs that meet your specific needs and budget, providing your employees with the freedom to choose the healthcare options that work best for them and their families. We handle the hard work for you, including reviewing your employees’ reimbursement requests and helping them select an individual health plan that works best for them. This saves you time and ensures compliance with the ACA, ERISA, HIPAA, and IRS regulations.
Ready to offer personalized health benefits to your team?
Speak with a PeopleKeep HRA specialist who can answer questions, help set up your account, and guide you through the beginning stages of your new benefit.
Texas health insurance FAQs
What is the minimum employer contribution for health insurance in Texas?
According to the Texas Department of Insurance, employers with two to 50 employees don't have to pay for an employee's health insurance premiums.
How many employees is considered a small business for health insurance?
The Affordable Care Act's employer mandate only applies to organizations with 50 or more full-time equivalent employees (FTEs). Organizations with fewer than 50 employees don't need to offer health insurance, though there are many benefits to doing so.
Can my small business pay for my health insurance?
Yes! The federal government allows organizations to offer their employees a stand-alone health reimbursement arrangement (HRA). This reimburses employees for their individual and family health insurance premiums and other expenses. Options include the qualified small employer HRA (QSEHRA) and the individual coverage HRA (ICHRA).