Do You Have to Offer Health Insurance in Texas

Texas Insurance Code Chapter 1501 answers this in its own words: the chapter does not require a small employer to purchase health coverage for its employees (Tex. Ins. Code § 1501.151(c)). The commands in that chapter run to the issuer, not to the employer — and a separate federal test decides whether the employer provisions reach your business.

Those are two different questions with two different answers, and most of the confusion an employer runs into comes from treating them as one. Here is each, with the text it comes from.

What Chapter 1501 asks of the issuer, and what it asks of you

The useful thing about the Texas answer is that the Legislature wrote it affirmatively rather than leaving it to be inferred. All three subsections of the same section are worth reading together, because the first two are the reason the third exists:

“(a) A small employer health benefit plan issuer shall issue the small employer health benefit plan chosen by the small employer to each small employer that elects to be covered under the plan and agrees to satisfy the other requirements of the plan. (b) A small employer health benefit plan issuer shall provide small employer health benefit plans without regard to health status related factors.”

“This chapter does not require a small employer to purchase health coverage for the employer’s employees.”

Read as one section, it is a description of who is under an obligation. The issuer must issue and must do so without regard to health status; the employer chooses. That is the Texas answer, and it is the statute’s own sentence rather than a summary of what the statute leaves out.

Who counts as a small employer here, and how the count is taken

The Texas band has a shape no employer should assume from another state. It is two conditions plus a second measurement, all in one definition:

“‘Small employer’ means a person who employed an average of at least two employees but not more than 50 employees on business days during the preceding calendar year and who employs at least two employees on the first day of the plan year.”

There is a floor as well as a ceiling, and there is a day-one headcount on top of the preceding-year average. Both must be satisfied. The large-employer definition at Tex. Ins. Code § 1501.002(8) carries the same day-one test, so the structure is consistent across the chapter rather than a quirk of one definition.

Who counts as an employee is the part that trips people up, and the regulator addresses it directly. Tex. Ins. Code § 1501.002(4) defines an employee as an individual employed by an employer — not an eligible employee — and the Texas Department of Insurance explains why:

“The federal Protecting Affordable Coverage for Employees (PACE) Act of 2015 amended provisions of the ACA to keep the definition of small employer at no more than 50 employees, while giving the states the option to set the definition at 100. No action is necessary in Texas to keep the definition at 50. In 2013, the Texas Legislature enacted SB 1332, which maintains the Texas definitions of small and large employer and removed a requirement that only ‘eligible’ employees be counted.”

A business that has not completed a preceding calendar year is not left without a rule: Tex. Ins. Code § 1501.011(a) uses the average the employer reasonably expects to employ on business days in the calendar year in which the determination is made. If you are standing up a plan for the first time, the first-time group health page walks through what that determination has to be ready for.

The federal line is a different number, counted a different way

The federal employer shared responsibility provisions turn on being an applicable large employer, and that is a tax-side definition with its own counting rules. The regulation is the instrument to read here rather than the statute, because the statute omits the parenthetical that does the work:

“The term *applicable large employer* means, with respect to a calendar year, an employer that employed an average of at least 50 full-time employees (including full-time equivalent employees) on business days during the preceding calendar year.”

Part-time hours are rolled up. A full-time employee for this purpose is one employed an average of at least 30 hours of service per week, with 130 hours of service in a calendar month treated as the monthly equivalent (26 CFR 54.4980H-1(a)(21)), and employees who are individually short of that are combined into full-time equivalents solely for determining applicable-large-employer status (26 CFR 54.4980H-1(a)(22)).

Set the two definitions side by side and the differences are structural, not cosmetic. Texas counts employees over the preceding calendar year and takes a second headcount on day one of the plan year. The federal rule counts hours of service over the preceding calendar year and aggregates part-timers into equivalents. Same employer, two counts, two different jobs — one decides which market rules attach to the policy, the other decides whether an assessable payment is possible at all.

Two people married to each other can be a Texas small group

This is the single most practically useful thing in Texas law for the smallest employers, and the regulator states it in its own voice rather than leaving it to be read out of the code:

“Under Texas law, a small group carrier must issue coverage, consistent with TIC §1501.151, to a small employer with two or more employees, even if the employees are married to one another. … Texas considers a group of two eligible employees to be a small group, regardless of marital status. The Texas Insurance Code does not exclude spouses from the definition of ‘eligible employee’ or exclude such employees in defining ‘small employer’ …”

The department dates that item on its own face to December 1, 2016, on a page whose footer reads “Last updated: 3/25/2025.” It also cites an administrative rule and a commissioner’s bulletin in support; those are the department’s citation strings, carried here as the department publishes them.

Contribution: the chapter does not require one, and the issuer may

Both halves of this belong in the same breath, because either one alone gives a false impression:

“This chapter does not require a small employer to make an employer contribution to the premium paid to a small employer health benefit plan issuer, but the issuer may require an employer contribution in accordance with the issuer’s usual and customary practices applicable to the issuer’s employer group health benefit plans in this state.”

So the obligation an employer actually feels at the quoting stage is the issuer’s, not the statute’s. Tex. Ins. Code § 1501.153(c) adds that an employer electing to contribute is not required to pay anything for an employee who declines to be covered.

Participation is a condition, and missing it narrows the door rather than closing it

Texas sets a participation level in the statute itself, at Tex. Ins. Code § 1501.154(a):

“coverage is available under a small employer health benefit plan if at least 75 percent of a small employer’s eligible employees elect to participate in the plan.”

Tex. Ins. Code § 1501.155 then supplies the relief valve: an issuer may offer below its own qualifying level, and may go lower still where the employer obtains a written waiver from each eligible employee who declines, stating that the employee was not induced or pressured to decline because of the employee’s risk characteristics.

What happens if a group still cannot get there is the part most employers do not know, and the regulator answers it plainly:

“Guaranteed issue requires issuers to allow any group to enroll in coverage; however, federal market rules at 45 CFR §147.104(b)(1) allow a small group issuer to limit the availability of coverage to an annual enrollment period (November 15 through December 15) for any plan sponsor that is unable to comply with a material plan provision relating to employer contribution or group participation.”

A group that cannot meet the condition is moved to a window, not turned away. That is a materially different situation from being declined, and it is worth knowing before a first attempt at group health coverage is written off as a dead end.

Large employers sit under the opposite default

The asymmetry inside one chapter is the sharpest structural fact in Texas group health law. Where the issuer must issue to a small employer, Subchapter M says the reverse for a large one:

“A large employer health benefit plan issuer: (1) may refuse to provide coverage to a large employer in accordance with the issuer’s underwriting standards and criteria; (2) shall accept or reject the entire group of individuals who meet the participation criteria and choose coverage; and (3) may exclude only those employees or dependents who decline coverage.”

That does not mean a large group is underwritten person by person. Tex. Ins. Code § 1501.602(b) requires that once a plan issues to a large employer, the issuer provide coverage to employees meeting the participation criteria without regard to an individual’s health status related factors. And on the large side the participation and contribution conditions have no statutory level at all — Tex. Ins. Code § 1501.605(a) leaves them to the issuer’s usual and customary practices, and § 1501.605(c) bars applying them to eligible dependents.

A cooperative is a purchasing route, and the statute calls joining it voluntary

Texas lets employers buy together. The word that matters is in the statute:

“An employer’s participation in a health group cooperative is voluntary, but an employer electing to participate in a health group cooperative must commit to purchasing coverage through the health group cooperative for two years”

Tex. Ins. Code § 1501.058(d) sets the size condition for a health group cooperative to exercise its statutory authority — “a health group cooperative must have at least 10 participating employers” — and the Texas Department of Insurance describes the same arrangement in plain language on its cooperatives page (https://www.tdi.texas.gov/health/indexlhcoop.html).

What sits outside this chapter entirely

Three boundaries are worth marking so nothing here is read further than it goes.

Chapter 1501 is insurance law, so it reaches insured coverage; an employer that self-insures — collecting contributions and paying employees’ claims from its own funds, typically contracting administration and network access to a third-party administrator (Self-insured plan) — is outside the market these rules describe.

Texas is served by a federally facilitated exchange, which the Texas Department of Insurance refers to as a federal Marketplace in Texas (Texas Department of Insurance health FAQ).

A national tracker of state Medicaid-expansion decisions records Texas with the status “Not Adopted” as of August 2026, on a methodology the tracker states as its own tracking and analysis of state executive activity (KFF, Status of State Action on the Medicaid Expansion Decision). That is a state policy decision about a public program and does not change what Chapter 1501 or the federal employer provisions ask of a Texas employer; what any individual employee’s own options are is set by program rules an employer does not administer and should be checked with the Texas Health and Human Services Commission at https://www.hhs.texas.gov/.

For the rest of the Texas ground — the regulator, the market structure, the rules that attach once you do buy — start at the Texas page, and when the question turns from whether you must to what it would actually look like, tell us about the group.