Rules before you buy
Most small businesses are not legally required to offer health insurance, but carriers do have their own rules on group size, participation, and how much you contribute. Here is what actually applies to a Dallas small business.
Small business health insurance requirements come from two different places: federal law, which applies mainly to larger employers, and carrier rules, which apply to every group buying a small-group plan. Knowing which is which helps you understand what you actually have to do versus what a specific carrier is asking for, and it keeps you from turning down coverage over a rule that does not actually apply to a business your size. If you would rather have someone check your specific numbers against the current rules, request a quote and we will confirm what applies to your group before you shop plans.
If your business has fewer than 50 full-time equivalent employees, no federal law requires you to offer health insurance. The ACA's employer shared responsibility provisions, sometimes called the employer mandate, only apply once a business reaches 50 or more full-time equivalent employees. At that size, an eligible employer generally has to offer affordable coverage that meets minimum value standards to its full-time staff or face a potential IRS penalty. The IRS page on employer shared responsibility lays out the full rule and how the FTE count is calculated. Since our small-group market here tops out at 50 employees, most Dallas businesses reading this are under the threshold and offering coverage is a business decision, not a legal one.
Texas defines small-group coverage as 2 to 50 employees. On the low end, many carriers will write a plan for a group as small as one owner and one employee, so a very small shop, office, or crew usually qualifies. Above 50 full-time equivalent employees, a business moves into the large-group market, which this site does not cover. Eligibility for the small-group market is generally based on how many common-law employees a business has, not how many people happen to enroll, so a group of ten where only six sign up is still a small group of ten for underwriting purposes.
Carriers also look at who counts as eligible in the first place. Most plans define an eligible employee as someone working a set minimum number of hours per week, commonly around 30, so part-time or seasonal staff below that threshold may not be eligible to enroll at all even though they are on payroll. Owners, partners, and their spouses are usually eligible too, which is part of why a one-owner, one-employee business can buy small-group coverage in Texas.
Carriers want to know that a plan will attract enough of the eligible group to spread the cost, so most set a minimum participation rule, commonly somewhere around 70 percent of eligible employees enrolling. This is a carrier underwriting practice, not a state or federal statute, and the exact percentage varies by carrier and plan. Employees who already have coverage through a spouse, Medicare, or Medicaid can usually waive your plan without counting against that participation number, which makes the threshold easier to hit than it first sounds.
Most carriers ask the employer to pay a minimum share of the employee-only premium, commonly around 50 percent, as a condition of offering the group plan. Again, this is common carrier practice rather than a law, and the exact figure depends on the carrier and plan you choose. What you contribute toward dependent coverage is typically up to you. Our small business health insurance cost guide covers how your contribution choice affects your total premium spend.
Most carriers let a business set a waiting period before a new hire's coverage starts, often 30, 60, or 90 days from the hire date, and a business subject to ACA rules cannot set a waiting period longer than 90 days. A waiting period gives you room to see whether a new hire works out before adding them to the group, and it is set in your plan document, so it is worth deciding on a length up front rather than negotiating it hire by hire.
Once you have a group plan in place, most carriers and payroll providers can set up a Section 125 cafeteria plan alongside it, which lets employees pay their share of the premium with pre-tax payroll dollars instead of after-tax income. That lowers each employee's taxable wages a little and lowers your payroll tax bill on the same amount, at no cost to set up beyond the paperwork. It is a detail many first-time employers skip, and it is worth asking your broker or payroll provider to add when you set up the plan.
Federal COBRA continuation coverage generally applies to employers with 20 or more employees. Texas law fills that gap for smaller groups: state continuation coverage rules, overseen by the Texas Department of Insurance, require many small-group plans to offer departing employees a way to keep coverage for a period after they leave, similar in spirit to COBRA but run under state rules instead of federal ones. The specifics depend on your plan and carrier, and TDI's site has current guidance on how it applies to a group your size.
Small-group plans sold in Texas are regulated by the Texas Department of Insurance, and ACA rules mean carriers cannot turn your group down or price it higher because of employees' health conditions. Coverage is guaranteed issue for eligible small groups, and enrollment happens whenever your business sets up the plan rather than during a fixed yearly window, since group coverage runs on your plan's own effective date. TDI's site is the place to verify a carrier's license or file a complaint if something does not look right.
If you are not sure whether your team clears the participation bar or what contribution level makes sense for your budget, that is exactly what a broker sorts out before you commit to a plan. Request a quote and we will check the requirements against your actual headcount and tell you where you stand. See our small business health insurance cost guide next for how these rules connect to what you will actually pay.
No. The ACA's employer shared responsibility rules only apply to businesses with 50 or more full-time equivalent employees. Below that count, offering group health insurance is your choice, not a legal obligation, and plenty of businesses under 50 employees choose to offer it anyway to compete for good workers.
A full-time equivalent, or FTE, count combines your full-time staff with a fraction of your part-time hours to reach an equivalent headcount. The IRS lays out the exact formula for the 50-employee threshold at irs.gov. Most businesses in the 2 to 50 range never need to run this math, since it only matters once you approach 50.
Texas small-group coverage is built for businesses with 2 to 50 employees. Many carriers will write a plan for a group as small as one owner plus one employee, so you likely qualify even as a very small operation.
Carriers commonly set a minimum participation rule, often around 70 percent of eligible employees, though the exact number varies by carrier and by how many employees waive coverage for a valid reason, such as having coverage through a spouse. This is standard carrier practice, not a state or federal law.
Many carriers ask employers to pay at least half of the employee-only premium as a condition of offering the plan. That is common carrier practice rather than a statutory minimum, and some carriers set the bar lower. Your broker or carrier will confirm the exact requirement for the plan you choose.
The Texas Department of Insurance oversees insurance carriers and plans sold in the state, including small-group health coverage. You can look up a carrier, file a complaint, or read consumer guidance at tdi.texas.gov.
Send us your headcount and we will tell you exactly what participation and contribution level your business needs to qualify for a small-group plan in Texas.