If you’re developing a small business, the cost of providing healthcare coverage is likely near the top of your mind. Group plans are usually more cost-effective. But do you and your employees qualify for group health insurance in Texas? It depends on your business type, the employee status of your workers, and several other factors. It’s always a good idea to understand the qualifications and prerequisites before applying for health insurance coverage. Here’s everything you need to know about group health insurance for your small business in Texas.
Texas Group Health Insurance: The Basics
In Texas, group healthcare coverage is essentially a packaged deal in which a single policy covers several different individuals (and potentially their dependents). Because the risk calculation is spread out over a group of people and not based on an individual’s particular medical history, it’s typically more cost-effective than individual coverage.
Under the Affordable Care Act (ACA), businesses with fewer than 50 FTE employees are not required to provide healthcare coverage. However, health insurance is an enticing benefit that encourages people to apply to your company and promotes employee retention. You are guaranteed approval for group coverage if you have at least qualifying employees (yourself included), and you’ll need to offer all employees of the same status the same healthcare coverage. So, all full-time employees are offered the same insurance, as are all part-time employees (though their options may be different).
Once you’ve purchased coverage, you can either pay the full premium and offer it as a fully paid benefit to your employees, or you can split the payment with them. However, you must pay at least 50% of the employee coverage. Note that the ACA does offer tax credits to help cover the cost.
Your Number and Type of Employees Matters
To qualify for group health insurance in Texas, you need at least two full-time equivalent employees, yourself included. So, if you have a sole proprietorship with one FTE employee (who is not your spouse), you generally qualify for group coverage. According to the IRS, a full-time employee works at least 30 hours per week. In Texas, the full-time equivalent is considered to be 32 hours per week.
So, if you have at least one person besides yourself who works at least 32 hours per week, you qualify for group coverage. You are not obligated to provide health insurance if your total number of employees (yourself included) is less than 50. If you do, though, you must provide all FTE employees the same coverage option.
If you run a family-owned business, keep in mind that you cannot qualify for group coverage if you and your spouse are the only employees. However, if you have other family members who work full-time for your small business, you may purchase a group health plan — as long as you have non-family employees as well.
Who is Considered an Employee?
If you’re not sure who counts as an employee for the purposes of group coverage qualification, ask yourself the following questions:
How many employees do I have?
If you have at least 2 (including yourself and if the second person is not your spouse or family member) and less than 50 total employees, read on.
How many of them are related to me?
You must have at least one employee who is not an owner or partner, not married or related to you, not seasonal or temporary, and not a contractor.
How many hours do they work?
For the purposes of calculating the full-time requirement for group coverage, you may count separate people whose combined work adds up to the FTE hours, which in Texas is 32 hours per week. So for example, if you have 2 employees who each work 16 hours per week, that counts as one FTE employee, and you qualify for group coverage. Keep in mind you would have to cover at least 50% of the cost of a group plan.
Do I supervise their work?
A contractor is anyone who provides services to you but whom you do not supervise. (Approving a freelancer’s work or providing feedback do not count as supervision.) This person generally runs their own business that sells products or services to you. Examples are web developers, copywriters, consultants, graphic designers, etc. If they do not perform their tasks as per your schedule and/or in your business space, they do not count as employees. If you do not dictate how or when they conduct their work, they do not count as employees.
Let’s say you are a sole proprietor with two part-time employees who each work 8 hours per week. If you book a freelance copywriter who works on your projects 16 hours per week, you still have not met the full-time equivalent in Texas (32 hours per week) because the copywriter is not technically your employee.
On the flip side, if you book a lot of freelancers, you don’t need to worry about their work counting toward your FTE and taking you over the 50-employee maximum to opt-out of mandatory coverage.
Sole Proprietors Need Individual Coverage
To obtain group coverage, you must have at least two FTE employees, yourself included. Therefore, if your business is a sole proprietorship and you are the only full-time employee, you are not eligible for group coverage. However, you may purchase an individual health insurance plan on the Healthcare Marketplace.
If you are a sole proprietor with several part-time employees whose combined hours are less than 32 per week, you will not qualify for group coverage. Each of your employees will need to purchase their individual coverage as well. This is why it’s often better to (a) ensure that your part-time employees make up at least a full-time equivalent or (b) book independent contractors rather than trying to obtain group coverage.
Who is usually not eligible for group health insurance?
As mentioned above, your small business in Texas is not eligible for group health coverage if you meet either or both of the following conditions:
• You are a sole proprietor or partner and your only other employee is a co-owner, partner, and/or spouse.
• You do not have enough full-time or part-time employees to make up at least one full-time equivalent (32 hours/week) beside you and your spouse, if applicable.
What do Employers Have to Pay?
Once you obtain group coverage, you must pay at least 50% of the entire premium, which includes coverage for yourself and your dependents, if applicable. If you offer insurance and dependents’ coverage to one full-time employee, you must offer it to all of them. Once you meet the 50% minimum, it’s up to you how much you pay. Some small business owners split the premiums 50-50, and others pay more as a benefit for their employees. Remember, you do qualify for tax credits to offset the costs. ANd you won’t be penalized if you don’t offer coverage as long as you have fewer than 50 FTE employees.
Helpful Facts about Applying for Small Business Group Health Insurance
If you qualify for group health coverage for your Texas small business, you may obtain it either through an insurance broker or through the Small Business Health Options Marketplace for Texas.
If you are a sole proprietor with at least one FTE employee who is not married or related to you, you may enroll everyone in a group plan and name your spouse and/or children as dependents.
You must enroll at least 70 percent of your full-time employees. If they obtain their own coverage, they don’t count toward this rule. You also can’t count seasonal employees toward your minimum. Note that any employee may legally refuse healthcare coverage if they decide that an individual ACA plan (or their spouse’s employer-sponsored plan) provides better coverage. It behooves you to select good group coverage and cover enough of the premium to encourage your employees to opt-in.
Finding Affordable Texas Group Health Insurance
If your small business is eligible for group health insurance, the next step is to find an affordable plan. Reach out to insurance providers for free quotes. Be prepared to answer questions about your number of employees, their qualifications, and how many of them you expect to opt-in. Once you have several plans to compare, look for the option that is most affordable, provides the best coverage, and works for your particular mix of full-time and part-time employees, both relatives and not. You should also consult with your legal and tax advisors to determine who among your team counts toward your FTE equivalent and how much of the premium you can afford to cover.
We hope that this guide has proven helpful for you. Health coverage matters can be frustrating for small business owners, which is why Coverage2Care is here to provide clarity and guidance. Reach out to us for free assistance.