Small Business Health Insurance Options
Providing health insurance helps Texas small businesses attract and retain quality employees while potentially reducing tax liability. But navigating group health insurance can be confusing—premiums vary dramatically, participation requirements differ by carrier, and newer alternatives like ICHRA offer flexibility traditional plans don't.
With over 20 years of experience, I help Texas business owners understand their options, compare costs from multiple carriers, and choose a solution that fits their budget and business goals.
Your Group Coverage Options
Texas small businesses have three main options for providing health benefits. Each has different costs, flexibility, and administrative requirements:
Traditional Group Health Plans
Fully-insured group plans where the employer chooses a plan and employees enroll. The employer typically pays a portion of premiums, and the insurance carrier handles claims.
Advantages
- • Simple for employees—one plan choice
- • Established system everyone understands
- • Employer has full control of plan design
- • Group rates (usually better for older/sicker employees)
- • Pre-tax premium deductions
Considerations
- • Higher administrative burden
- • Minimum participation requirements (70-75%)
- • Premiums increase annually (often 10-20%)
- • Employer contribution usually required (50%+)
- • Limited plan choices
Typical Cost:
$400-800 per employee per month (varies by age, location, plan type)
ICHRA (Individual Coverage HRA)
Individual Coverage Health Reimbursement Arrangement—employers provide a monthly allowance, and employees purchase their own individual health insurance from the ACA marketplace. The employer reimburses employees tax-free for their premiums.
Advantages
- • Predictable monthly cost for employer
- • No minimum participation requirements
- • Employees choose their own plans
- • Can vary allowance by employee class
- • Less administrative burden
- • Works for remote/multi-state teams
Considerations
- • Newer concept (less familiar to employees)
- • Requires employee education
- • Must comply with HRA administration rules
- • Employees shop individually
- • Premium variability by employee age
Typical Cost:
Employer sets monthly allowance (often $300-700 per employee). Employees may pay additional if they choose more expensive plans.
Minimum Essential Coverage (MEC)
MEC plans provide basic preventive care benefits and help employers meet ACA requirements to avoid penalties. These are NOT comprehensive health plans—they cover preventive services only.
Advantages
- • Very low cost ($100-200/employee/month)
- • Helps avoid ACA penalties
- • Covers preventive care (checkups, vaccines)
- • Simple to administer
- • No underwriting or health questions
Important Limitations
- • Does NOT cover doctor visits for illness
- • Does NOT cover prescriptions
- • Does NOT cover hospital stays
- • Employees need supplemental coverage
- • Not "affordable" under ACA standards
Important:
MEC plans are supplemental only—employees should purchase comprehensive coverage separately.
Texas Small Group Requirements
To qualify for small group health insurance in Texas, you must meet certain requirements:
Eligibility
- • 2-50 employees (Texas small group market)
- • At least 70% of eligible employees must enroll (most carriers)
- • Employees must work 30+ hours/week
- • Waiting period up to 90 days allowed
- • Open enrollment annually
Employer Contribution
- • Most carriers require 50% minimum of employee-only premium
- • Dependent coverage contribution is optional
- • Contribution must be consistent for all eligible employees
- • Pre-tax contribution through Section 125 plan
- • Annual increases typical (10-20%)
Understanding Group Insurance Costs
Group health insurance costs depend on several factors. Here's what influences your premiums:
In Texas, small group rates are based on the age of employees (older employees cost more). However, pre-existing conditions cannot affect rates or eligibility—that's protected by the ACA.
Premiums vary by county and ZIP code based on local healthcare costs. Urban areas like Houston, Dallas, and Austin typically have more carrier options and competitive rates.
HMO plans are usually less expensive than PPO plans. Higher deductibles mean lower premiums. Metal levels (Bronze, Silver, Gold) indicate how much the plan pays vs. the employee.
Some industries have higher risk profiles. For groups under 50, Texas uses community rating (your group's claims don't directly affect your rates the first year). Larger groups may be experience-rated.
ACA Requirements for Small Employers
The Affordable Care Act has specific requirements for businesses with 50+ full-time equivalent employees (FTE). Smaller businesses aren't required to offer coverage, but if they do, certain rules apply:
Under 50 Employees
Good news: You are NOT required to offer health insurance under the ACA. No penalties apply.
However, offering health benefits helps you attract and retain talent. You may also qualify for the Small Business Health Care Tax Credit if you have fewer than 25 FTE employees and average wages under $58,000.
50+ Employees (FTE)
ACA Employer Mandate: You MUST offer affordable, minimum value health coverage to full-time employees (30+ hours/week) or face penalties.
- • Coverage must be "affordable" (employee cost ≤ 9.12% of household income for 2023)
- • Must provide "minimum value" (plan pays ≥60% of costs)
- • Penalties up to $2,970 per employee if you don't comply (2024)
How to Choose the Right Option
Not sure whether traditional group insurance, ICHRA, or MEC is right for your business? Here's a simple guide:
| Your Situation | Best Option | Why |
|---|---|---|
| Budget is tight, need basic benefits | MEC | Low cost, ACA compliant, covers preventive care |
| Want comprehensive coverage, traditional setup | Traditional Group | Full benefits, employees understand it, group rates |
| Remote team or multi-state employees | ICHRA | Works across state lines, employees choose own plans |
| Predictable budget, less admin work | ICHRA | Set monthly allowance, no participation requirements |
| Young, healthy workforce | Traditional Group | Lower group premiums for younger employees |
| Wide age range among employees | ICHRA | Avoid subsidizing older employees' higher costs |
Need a Recommendation?
Every business is different. I'll review your employee demographics, budget, and goals to recommend the best option for YOUR situation. Let's discuss your needs in a free consultation.
Texas Group Insurance Carriers
As an independent agent, I work with all major Texas group health insurance carriers to find you the best combination of coverage and price:
Blue Cross Blue Shield
Aetna
UnitedHealthcare
Cigna
Humana
Oscar Health
Ambetter
And more...
Get Your Free Group Insurance Quote
Ready to provide health benefits to your team? Let's find the right solution for your business. I'll compare options from multiple carriers and help you understand the costs, requirements, and setup process.
Free Group Insurance Consultation
Tell me about your business, and I'll provide quotes from multiple carriers. No obligation, no cost—just expert guidance to help you make the right decision for your team.