A private purchasing cooperative is a nonprofit corporation that Texas employers form together to buy health coverage. Tex. Ins. Code § 1501.056(a) lets two or more small or large employers form one. It is a buying structure rather than an insurer, and it is not the same instrument as a health group cooperative.
Two instruments, one subchapter, and different founders
Texas keeps its cooperative law in one place. Subchapter B of Tex. Ins. Code Chapter 1501 is titled “Coalitions and Cooperatives,” and the section that creates the institution — Tex. Ins. Code § 1501.056(a) — opens with two sentences that look parallel and are not:
Two or more small or large employers may form a private purchasing cooperative to purchase small or large employer health benefit plans. Subject to Subsection (d), a person may form a health group cooperative to purchase employer health benefit plans. A cooperative must be organized as a nonprofit corporation and has the rights and duties provided by the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon’s Texas Civil Statutes).
Read the subjects rather than the names. A private purchasing cooperative is formed by the employers — the buyers are the founders. A health group cooperative is formed by “a person,” and the next subsection says which persons. Tex. Ins. Code § 1501.056(d) both excludes a class and names the one it has in mind:
A health benefit plan issuer may not form, or be a member of, a health group cooperative. A health benefit plan issuer may associate with a sponsoring entity, such as a business association, chamber of commerce, or other organization representing employers or serving an analogous function, to assist the sponsoring entity in forming a health group cooperative.
That is the practical difference for a Texas employer. One instrument you can charter yourself with the other employers you already know. The other is typically built around you by a sponsoring organization. The two names appear in the same statute and are routinely used as though they were interchangeable, and they are not — several later sections of the subchapter are written for health group cooperatives specifically and say so in their own headings. What joining one of those commits an employer to is a separate question, answered on the page about whether a Texas employer has to offer coverage. Nothing on this page carries a rule or a figure from those sections, because a rule verified for one instrument is not verified for the other.
The form is fixed: a nonprofit corporation
The organizational requirement is in the same subsection as the grant of power, and it is not optional. A cooperative “must be organized as a nonprofit corporation,” with the rights and duties of the Texas Non-Profit Corporation Act. The Texas Department of Insurance restates the point in plain language on its page about forming a private purchasing cooperative, which is the closest thing the state publishes to a set of instructions.
So a cooperative is a real corporate entity with members, officers and organizational documents. It is not a loose buying group, an informal arrangement among neighboring businesses, or a name put on a joint request for proposals. If a group of Texas employers wants the thing the statute describes, it has to charter the thing the statute describes.
What a cooperative is not, in the statute’s own words
Two short sections do more work than anything else in the subchapter, because they close off what a reader is most likely to assume. The first is Tex. Ins. Code § 1501.059, which is one sentence long in its entirety:
A cooperative may not self-insure or self-fund any health benefit plan or portion of a plan.
The second is Tex. Ins. Code § 1501.062(a):
A cooperative is not an insurer and the employees of the cooperative are not required to be licensed under Title 13.
Put together, the Legislature has written the negative so nobody has to infer it. A Texas cooperative is a buying structure, not a risk-bearing one. It does not take on claims risk, it does not pay claims out of member contributions, and joining one does not convert an employer’s coverage into a self-funded arrangement. Coverage purchased through a cooperative is still a health benefit plan issued by a licensed issuer, with everything that follows from that — which is the same structure described on the page about what a group health plan is and how it works in Texas.
The names are a category and its members
Texas uses several names in this area, and a first-time reader reasonably assumes they are parallel alternatives. They are not. Tex. Ins. Code § 1501.051(3) defines the umbrella term: “Cooperative” means a private purchasing cooperative or a health group cooperative established under this subchapter. And the definitions section of the chapter resolves the third name that turns up most often. Tex. Ins. Code § 1501.002(16-a) provides:
"Small employer health coalition" means a private purchasing cooperative composed solely of small employers that is formed under Subchapter B.
A coalition, in other words, is a private purchasing cooperative with a restricted membership. It is a species, not a separate genus. The insurance department reaches the same conclusion independently on its page describing the types of cooperatives, where it says the forms it lists are all private purchasing cooperatives under law and that it will use “private purchasing cooperatives” for the broader category. A statutory definition and a regulator’s plain-language explanation agreeing on the structure is about as settled as this kind of question gets.
The department’s own registry uses short codes for the forms it accepts filings from, and naming them is the quickest way to see the taxonomy on one line:
“HGR = Health Group Cooperatives (originally authorized by SB 10 from the 78th Legislative Session)” “PPC = Purchasing Cooperatives (originally authorized by HB 2055 from the 73rd Legislative Session)” “SEHC = Small Employer Health Coalitions (originally authorized by HB 897 from the 78th Legislative Session)”
How one is formed, and in what order
The order surprises people, and getting it backwards wastes time. A cooperative is chartered by the secretary of state and only then reported to the insurance regulator. Tex. Ins. Code § 1501.056(b) sets out the filing:
On receipt of a certificate of incorporation or certificate of authority from the secretary of state, the cooperative shall file written notice of the receipt of the certificate and a copy of the cooperative’s organizational documents with the commissioner.
The department describes the same sequence on its forming page, in the same order:
Once the cooperative has received a certificate of incorporation or certificate of authority from the secretary of state, the cooperative must file that document and the cooperative’s organizational document with the Texas Department of Insurance.
Notice what the filing is. It is a written notice that the certificate has been received, made on receipt, together with the organizational documents — the corporation exists before the insurance regulator hears about it, and the regulator is not the body that charters it. An employer who assumes a cooperative is licensed into existence by the insurance department has the sequence reversed.
What the department’s list is, and what it is not
Because that notice is filed, there is a published record of it. The department says exactly what the record represents:
This report lists cooperatives that have provided the commissioner written notification of their receipt of a certificate of incorporation or certificate of authority from the secretary of state.
And it prints its own caveat directly beneath, which matters more than the list:
Note: Listed cooperatives may not be active.
That is a regulator declining to assert something about its own publication, and it should be taken at face value. The list records filings, not going concerns. An entity that filed a notice years ago and has done nothing since appears exactly as an operating one does, because the filing is what the statute requires and the filing is what the list reflects. No cooperative is named on this page for that reason, and a reader should not treat a name on the department’s list as evidence that anyone is home.
Who a cooperative may buy from
A reasonable next assumption is that a cooperative widens the field of what an employer can buy. The statute does the opposite. Tex. Ins. Code § 1501.061 sets conditions on the other side of the contract:
A cooperative may contract only with a small or large employer health benefit plan issuer that demonstrates that the issuer: (1) is in good standing with the department; (2) has the capacity to administer health benefit plans; (3) is able to monitor and evaluate the quality and cost-effectiveness of care and applicable procedures; (4) is able to conduct utilization management and establish applicable procedures and policies; (5) is able to ensure that enrollees have adequate access to health care providers, including adequate numbers and types of providers; (6) has a satisfactory grievance procedure and is able to respond to enrollees’ calls, questions, and complaints; and (7) has financial capacity, either through satisfying financial solvency standards, as applied by the commissioner, or through appropriate reinsurance or other risk-sharing mechanisms.
The word doing the work is “only.” Buying through a cooperative does not loosen who the coverage comes from; it narrows the field to issuers that can demonstrate the listed capacities to the cooperative. That is consistent with everything above — the cooperative is the buyer, and the issuer is still the issuer.
What a cooperative actually decides
The concrete answer to “what does it do” is a benefit-election answer, and the department states it plainly:
An original private purchasing cooperative is considered a single small employer solely for the purpose of benefit elections. This means that the private purchasing cooperative may act as the employer when choosing the type of plan, cost-sharing provisions, and any optional benefits to be purchased.
That is the trade a member employer makes. Plan design decisions an employer would otherwise make alone are made at the cooperative level, for the members together. Whether that is attractive depends on how much a business wants to control its own plan design and how closely its priorities match those of the other members. Questions about the group an insurer rates are a separate subject with their own page, on what an insurer can use to rate your group in Texas, and nothing about rating is decided here.
The public one, and why the phrase points at two things
There is one more reason the phrase “purchasing cooperative” causes confusion in Texas: the code also establishes a state-level body of its own. Tex. Ins. Code § 1501.052(a) provides:
The Texas Health Benefits Purchasing Cooperative is a nonprofit corporation established to make health care coverage available to small and large employers and their eligible employees and the eligible employees’ dependents.
It is a creature of statute rather than something employers charter, and Tex. Ins. Code § 1501.055 confirms its public character: the Texas cooperative is subject to the public information law, Chapter 552, Government Code. So “purchasing cooperative” in Texas can mean a statutory public entity or a private nonprofit that any two employers may charter, and those are genuinely different things with different origins.
One caution, stated rather than glossed. The sections establishing the state cooperative are unrepealed statutory text, and unrepealed is not the same as operating. This page makes no claim in either direction about whether that body is currently doing anything, because no source consulted for it establishes one. If a cooperative route is something you are weighing for a first plan, the practical starting point is the structure of the plan itself and what Texas law requires of it — which is where our Texas page begins.
The bottom line
A private purchasing cooperative is a nonprofit corporation Texas employers charter themselves to buy health benefit plans together. The statute makes it a buying structure and not a risk-bearing one: it may not self-insure, it is not an insurer, and it may contract only with a licensed issuer that meets the conditions the code sets. It is also not the same instrument as a health group cooperative, which a sponsoring entity forms and which the code governs with its own separate sections.
Frequently asked questions
What is a private purchasing cooperative in Texas?
It is a nonprofit corporation that employers form together to purchase small or large employer health benefit plans. Tex. Ins. Code § 1501.056(a) creates it, requires it to be organized as a nonprofit corporation, and gives it the rights and duties of the Texas Non-Profit Corporation Act. It buys coverage; it does not issue it.
Who can form a private purchasing cooperative in Texas?
The employers themselves. Tex. Ins. Code § 1501.056(a) provides that two or more small or large employers may form a private purchasing cooperative to purchase small or large employer health benefit plans, so a Texas employer can be a founder rather than only a member of something somebody else built.
Is a Texas cooperative an insurance company?
No, and the code says so twice. Tex. Ins. Code § 1501.062(a) provides that a cooperative is not an insurer and that its employees are not required to be licensed under Title 13, and Tex. Ins. Code § 1501.059 provides that a cooperative may not self-insure or self-fund any health benefit plan or portion of a plan. Coverage bought through one is still issued by a licensed health benefit plan issuer.
Is a small employer health coalition something different?
It is a narrower version of the same thing. Tex. Ins. Code § 1501.002(16-a) defines a small employer health coalition as a private purchasing cooperative composed solely of small employers that is formed under Subchapter B. The membership is restricted; the instrument is not a separate category.
Is a health group cooperative the same as a private purchasing cooperative?
No. Tex. Ins. Code § 1501.056(a) lets employers form a private purchasing cooperative, while a health group cooperative is formed by a person subject to the conditions in subsection (d), which bars a health benefit plan issuer from forming or joining one and allows it to assist a sponsoring entity instead. The sponsor classes are different, and several later sections of the subchapter are written for health group cooperatives specifically.
Does the Texas Department of Insurance list tell me which cooperatives are operating?
No. The department publishes a report of cooperatives that have given the commissioner written notification of a certificate received from the secretary of state, and it prints its own note that listed cooperatives may not be active. It is a record of filings rather than a directory of going concerns, and it should not be read as one.
About the author
Nate Jones, CPCU, is the founder of Wexford Insurance and Wexford Health Insurance, an independent agency placing small-business group benefits in 9 states. Nate reads Subchapter B of the Texas Insurance Code section by section rather than by name, because Texas gives two different cooperative instruments similar names and puts them in consecutive sentences of the same statute. Start with the Wexford Health Insurance quote form.