The Texas Small Business Health Insurance Guide
Welcome, small business owner from the Lone Star state! Small business is big business in Texas since the industry employs over 4.7 million Texans (45% of the workforce) and many of those business industries are growing rapidly. With recent legislation changes, small business owners now can provide health insurance to their employees with ease. In Texas, if you have between two and 50 employees, health insurance is an option (not a legal requirement) that you may offer as an added benefit to your employees. Even though it might seem daunting to add this coverage, including health insurance to your risk management plan has never been easier.
To understand the wide scope of health insurance for small businesses, check out our full guide here. To understand how health insurance works for Texas small businesses specifically, keep reading.
Table of Contents
What is Health Insurance?
Health insurance refers to insurance policies that cover medical expenses. Small business health insurance is group insurance designed to meet the needs of a smaller organization that may not have a full HR department to organize health benefits. In Texas, small businesses utilize the government’s Small Business Health Options Program (SHOP) and purchase insurance through the federal health insurance website.
Health insurance protects people if they need medical care due to an illness or an injury and provides preventative care — routine check-ups, annual tests. The amount of money a person might pay for a routine visit or an emergency visit or surgery will vary depending on the health plan. Here are some important terms to know related to health insurance:
- Deductibles: This is an amount of money you will pay before your health insurance takes over and pays for you. (Lower premiums per month might result in a higher deductible.)
- Copayment (Copay): This is the fixed amount you pay for services. (For example, every office visit is $20 or every prescription is $10.)
- Coinsurance: This is the percentage of the cost you will pay for services after you’ve reached your deductible. (For example, with a 20/80 coinsurance, you will pay 20% of the cost for services and your insurance will cover 80%.)
- Out-Of-Pocket Limit: The maximum amount of money you are expected to pay for services in a calendar year. After your limit, the insurance covers 100% of services.
- Health Care Provider Network: This is a list of doctors and other providers that will accept your insurance.
- In-Network: A specific list of providers/specialists your insurance will accept.
- Out-Of-Network: Providers and specialists that your insurance may not pay for or will cover a smaller portion of the expenses.
Who Needs Health Insurance?
In a perfect world, everyone would have health insurance. Illnesses and accidents are unavoidable as we journey through life, and the stress and worry of encountering a medical problem are hard enough without also worrying if you can afford the care you or a dependent needs. Even healthy people need regular visits with a doctor or coverage in case of an emergency.
Prior to the implementation of the Affordable Care Act (ACA), Texas had one of the highest rates of uninsured Americans in the country. Coverage for Texans is expanding due to the ACA, and in the past several years the percentage of uninsured adults has dropped from 24.5 to 19.1, according to an America’s Health survey. (Despite the dip, it’s still in the top two highest uninsured states, now behind Florida. Which means, more Texans need coverage, possibly through their employer.)
If you are a small business owner with over 50 employees, you are legally mandated to offer insurance to your employees. If you are a small business owner with between two and 50 employees, offering health insurance is optional. Even though you may not be legally obligated to offer health insurance, there are several benefits of offering health insurance that may make it more than worth it for your business. In addition to your employees feeling happy, healthy, and comfortable working for you, if you pay at least 50% of employee premiums, you are eligible for tax credits and tax deductions.
Texas Health Insurance Requirements
Offering health insurance is optional in Texas if you are a small employer. According to the Texas Government, “Texas insurance law defines a small employer as a business with two to 50 employees, regardless of how many hours the employees work.” Additionally, Texas law counts 120 hours of work done by part-time employees in a month as a full-time equivalent employee. Texas laws also don’t require you to pay your employee’s premiums, although many of the insurance companies will require you pay at least 50% of employee premiums.
Also, according to Texas law, if you offer health insurance to any employees, you must offer it to all employees who work 30 hours or more a week and all employee dependents (all or nothing). You can make employees wait up to 90 days before they are eligible for health insurance benefits, and if employees don’t sign-up for insurance within a 31-day window, you can deny them insurance benefits until open enrollment.
Small businesses beware: if you have fewer than 75% of your employees participating in your health insurance program, most insurance companies will make you wait until open enrollment to begin your plan. Businesses with over 75% participation can enroll anytime.
Federal law requires small-employer plans to cover 10 types of essential health benefits. These benefits include:
- Outpatient care
- Emergency services
- Hospitalization and surgery
- Maternity and newborn care
- Mental health and substance use disorder services
- Prescription drugs
- Rehabilitative services and devices
- Laboratory services
- Preventive and wellness services
- Pediatric services
Individual VS Group Health Insurance
An individual health insurance plan is a health insurance plan that an individual pays for and designs to fit their needs. One option for small businesses is to give employees a monthly sum and have the employee take control of where to purchase insurance. With the addition of individual health marketplace, more people can invest in health insurance without the need to go through a group insurance plan. A group health insurance plan is where a group (namely, a company or business) buys insurance for members of that group at a reduced rate.
Health insurance is expensive and fluctuates with rising health care costs. For group health, premiums are rising and employers are requiring their employees to pick up more of the financial burden. For individual health plans, recent legislation has scared some providers away, and with fewer options, the individual plans may not have many incentives.
Which Type Is A Good Fit For Your Business?
Group plans are great for businesses with a growing number of employees, especially those who might have families. The more people to cover, the more a group plan will be more cost-effective. Also, if you have a young and healthy staff, you can negotiate rates. The drawback is that premium increases have outpaced wage growth in the past few years.
Individual plans might be best for small businesses looking for ways to save on health care. With a defined contribution plan, tax-free money is given to an employee each month to spend on health insurance. With more individualized care, health money may be spent more efficiently.
Types Of Texas Health Insurance Plans
Texans can access the federally-run marketplace at HealthCare.gov to see a list of insurance plans available in their state. As you start to shop, you will find that there are several specific health insurance plans for you to choose from. The main differences come down to:
- Size of the network
- The cost for you and for your employees
- The ability to see specialists without referrals
- The size of the in-network
- Cost coverage for out-of-network services
Here is an overview of each of the major health insurance plans and what they mean for your small business.
Health Maintenance Organization (HMO)
An HMO is a type of health insurance plan where there is a network of doctors that accept your insurance. Your employees only have access to providers employed through the HMO and out-of-network care is often not covered (except in an emergency). The HMO provides a lower cost option to employees but lowers the choices of providers/hospitals where they can be treated.
The HMO plan is ideal for:
- People who want to know exactly what each visit will cost
- Young and healthy people
- People with known health procedures and a significant number of appointments (for example, pregnancy)
- People who don’t need many specialists
- Focused on prevention and wellness
With an HMO, the insured must retain a Primary Care Physician and go through that doctor for referrals to specialists. That means this plan is not ideal for people who need care across a wider geographical area (people who travel). However, out-of-pocket expenses tend to be lower and more predictable.
Preferred Provider Organization (PPO)
A PPO is a type of health insurance plan where a network of doctors agrees to accept a set payment. Unlike the HMO, you aren’t limited to in-network provers, so you have access to any health provider you choose (out-of-network providers just cost more). You also do not need a referral for specialists. Since there are most choices, the premium costs of a PPO are generally higher.
The PPO plan is ideal for:
- People who might spend more for more specific care
- People who want choice on which medical professionals to visit
- People who visit specialists and want the option to choose their own
The PPO plan is more choice for more money and with greater flexibility.
To learn about the other types of health insurance available, read our Ultimate Guide To Small Business Health Insurance.
How Much Does Health Insurance Cost In Texas?
Cost is always at the forefront of decisions when you’re running a small business. Even you only have one employee! In the federal marketplace for small employers, there are categories of Bronze, Silver, and Gold plans. These plans are based on your employee’s age. Here are some sample prices for ages, taken from the SHOP Marketplace data. Prices are listed in order of bronze, silver, and gold plans, and rounded to the nearest dollar. This is the cost per employee, per month.
- Employees in their 20s: $102, $142, $164
- Employees in their 30s: $160, $223, $259
- Employees in their 40s: $205, $285, $331
- Employees in their 50s: $286, $399, $331
How Do I Find Health Insurance?
Now that you understand your insurance obligations as a Texas small business owner and have an idea of how much health insurance is going to cost, where do you find health insurance?
Texas Insurance Providers and Resources
To see a list of individual health plan providers, go to healthcare.gov and search for available plans in your area. The participating insurance companies in Texas include:
- Blue Cross Blue Shield of Texas
- Community Health Choice
Note: Participants change yearly. Visit healthcare.gov for the most up-to-date information and providers.
When Can I Enroll?
Coverage for the year of 2019 is already closed, but open enrollment for individuals or companies with fewer than 75% of their employees in the insurance pool will open in November. Open enrollment in Texas goes from November 1 to December 15.
How Do I Choose The Right Insurance Plan?
Choosing the right plan for your business comes down to asking yourself the following questions: What kind of medical care do my employees need? How much money am I willing to put into health insurance? And, is choice or cost more important to my employees?
In order to determine which policy will work best, decide how many of the upfront costs you are willing to contribute to your employee premiums and what kind of insurance options would be the best fit. Here are the biggest factors in health insurance costs:
- Medical history
- Prescription drug coverage
- How many visits are needed to a doctor per year
- What specialists are provided, if any
- Specific employee medical needs and history
- Any plans for pregnancies, etc.
Think about your employees, their ages, and their needs. With an outline of what best suits your employees, you’ll be able to sit down with an insurance agent or broker and determine how to get the best policies for the cost.
Choosing health is the right decision and choosing to insure the health of your employees is an important decision as well. Once you’ve decided that your business needs health insurance, follow the steps to secure health insurance through the federal marketplace. Acquaint yourself with the terms of each insurance package and help employees understand their benefits, too. It’s easier than ever to find a way to insure your health and the health of your employees, so don’t be afraid to take the leap.