Texas – Health Insurance FAQs

So far, BCBSTX is the only carrier with any info. More are coming soon.

Texas has 5 fully-insured small group carriers. The largest by far is BCBS, with 83% market share. UHC is second with 10%. Humana was third but exited the market January 1, 2024.

Texas also has a few rules that are different from other states, including the ability to write husband-and-wife groups, owner-only groups, and one-person groups (with BCBSTX). Below is information on the different carriers as well as the rules that a applicable to all carriers offering small group coverage. For carrier-specific information, click the links to visit the carrier pages.

CARRIERS

Texas has 5 fully-insured small group carriers:

Blue Cross Blue Shield of Texas (BCBSTX): BCBSTX is the largest small group carrier in the state, with about 88% market share. They have the largest PPO network (called Blue Choice) and the largest HMO network (called Blue Access). They offer coverage in all 254 counties in Texas and allow a group to offer up to 6 plan options, including “ghost” plans with no current enrollment. They will also accept a “group of one” as long as there’s another eligible owner or employee (one can enroll, the other can waive). BCBSTX has 35 PPO plans and 36 HMO plans. The in-network benefits for the PPOs are mirrored for the HMO plans, but there’s one additional HMO available.
UnitedHealthcare (UHC): UHC also offers coverage in all 254 counties in Texas. In the past, they had different packages of plans in different counties, but in 2024, they offer the same plans in every single market. They have a PPO offering (using their Choice Plus network), an EPO (same network but no out-of-network benefits), and an HMO offering (using their Navigate network). The PPO is technically filed as a POS, but even the UHC sales reps refer to it as a PPO. UHC is not competitive with BCBSTX, but their platinum-level PPO plans do get close in some markets. UHC is more focused on selling their level-funded plans. They are the largest level-funded carrier in the state, and Texas is the biggest market for UHC’s level-funded plans.
Baylor Scott & White (BSW): This company was formed when two popular hospital chains, Baylor and Scott & White merged a few years ago. They formed a health plan that now operates in 141 of the 254 counties in Texas. BSW offers four different provider networks: PPO Plus, HMO Plus, HMO Preferred, and Access PPO. The Preferred HMO is a smaller network and, therefore, has lower prices. The Access PPO uses the PPO Plus network when a member is in the 141 counties and has a spillover UHC network when the member receives care outside the 141 counties. It is the network that anyone who lives outside the service area would need to select. BSW allows employers to offer up to 3 plans to employees, including “ghost” plans with no current enrollment.
Memorial Hermann (MH): Memorial Hermann is a popular hospital chain in the Houston area, and they have a health plan that operates in only abotu 7 counties in the Houston metropolitan area (spanning 3 rating areas).
Allstate Benefits: Allstate offers small group coverage in every county in Texas, but, by their own admission, they are not competitve and their network is very small compared with other carriers like BCBSTX. In some markets, they have a separate set of plans that uses the even smaller Healthcare Highways network, and they are a little more competitive on those plans. While fully-insured plans are offered, Allstate doesn’t really want to sell them and is focused on selling their level-funded plans.

Two other fully-insured carriers exited the Texas small group market January 1, 2024:

Aetna: Aetna, which is now owned by CVS, has offered one to four plans in the different markets in Texas for the past few years, but they were very uncompetitive and only had about 100 members enrolled across the state. They pulled out of the fully-insured market January 1, 2024. They are focused on selling their level-funded plans, called Aetna Funding Advantage (AFA). These plans are competitive – they are the second largest level-funded carrier in Texas (behind UHC).
Humana: Humana used to be a big player in the Texas market, especially in central and south Texas (San Antonio and Corpus Christi). They were uncompetitive in other parts of the state (like Houston and Dallas-Fort Worth). Humana made the decision to exit the commercial medical market January 1, 2024. They do still offer fully-insured ancillary benefits like dental and vision, which are popular.

RATING RULES

Age Rating: Every carrier in Texas offers the option of age-rating, also called member-level rating. Each covered employee and dependent is charged a premium based on their age. A premium is charged for every adult age 21 and older and for the oldest three children under the age of 21 (so if a family has more than three children under 21, there is no charge for the youngest child or children).
Composite Rating: Every carrier in Texas also offers the option of composite rating. When they do, employee-only is set at a factor of one, employee + spouse and employee + child(ren) is set at a factor of two, and employee + family is set at a factor of three. This means that the EC and ES rates are twice the employee rate and the EF rate is three times the employee rate. So if EO is $300/mo, then ES and EC would each be $600 per month and EF would be $900 per month.
Rating Factors: The only factors used to determine small group rates in Texas are the ages of the employees and dependents (based on the standard CMS age curve) and the location of the business (Texas has 27 rating areas). The zip codes of the employees are not used when calculating the rates.
Tobacco: Tobacco use is not a permissible rating factor in the Texas small group market.

UNDERWRITING / ELIGIBILITY RULES

Full-time status: In Texas, an employee averaging 30+ hours per week is considered full-time and eligible for benefits.

Husband-and-wife groups: H&W groups without any W-2 employees are fine as long as they are set up as a partnership (or an LLC filing as a partnership) where each owns at least 2% of the business. With BCBSTX (the largest carrier ins the state), there is no requirement that they work full-time in the business.

Businesses with no W-2 employees outside the household: This is also fine in Texas. A business where all of the eligible owners/employees reside in the same household is permissible. It could be set up several ways:

A proprietorship or single-member LLC where one spouse is the owner and the other spouse or another member of the household is a full-time (30+ hours) W-2 employee.
A partnership or LLC filing as a partnership where both spouses or two members of the household are members with at least 2% ownership.
An S-Corp or LLC filing as an S-Corp with one or more owners and at least one W-2 employee (but one of the owners can also be a W-2 employee, so there’s no requirement to have an additional W-2 employee outside the household).

Partnerships with no W-2 employees: A partnership or LLC filing as a partnership is acceptable even if there are no W-2 employees. Each owner (with 2% or more ownership) is eligible for the group coverage. With BCBSTX, there is no requirement that the owners work full-time in the business.

DOCUMENTATION REQUIREMENTS

While each carrier’s rules could vary slightly, there’s a lot of overlap in their documentation requirements. The number one rule is that every owner and eligible employee needs to be accounted for.

Wage and Tax Statement: For most small employers, the wage & tax statement is the best evidence of an employer-employee ralationship. That’s why every carrier in every state will ask for the wage & tax report, when available, when a company is applying for group health insurance benefits. In Texas, the wage & tax statement is called the Texas Workforce Commission Report, or TWC Report. This report will need to be “reconciled” by indicating next to each employee’s name whether they are Full-Time (FT), Part-Time (PT), or Termed (along with the date of termination). Other documentation can be provided for owners and employees who do not appear on the wage & tax report.

New Employees: If a new employee W-2 employee is not on the latest TWC report, then the carrier will want a copy of the employee’s W-4. Most carriers will also ask for a copy of at least one pay stub showing Federal Income Tax as well As FICA (Social Security and Medicare) taxes being withheld. From experience, it seems that even though BCBSTX asks for the copy of a pay stub, they will often approve a group with just the W-4 and no pay stub, so it’s worth submitting without the pay stub if it’s unavailable and seeing if they ask for it.

Owners: For businesses that are not set up as C-Corps (and most small businesses are not C-Corps), the business owner usually is not on the wage & tax report. For that reason, other documentation will be required tying them to the business. For estabilished businesses, the carrier will want the most recent tax return for the business or business owner (the schedule C for a proprietorship or single-member LLC, the 1065 and K-1’s for a partnership or LLC filing as a partnership, and the 1120S and K-1s for an S-Corp or an LLC filing as an S-Corp).

New Businesses: New businesses that have not yet filed a tax return will need to provide other documentation tying the owner to the business.

Certificate of Formation: The vast majority of small businesses are set up as Limited Liability Companies, or LLCs. To set up an LLC, the company must file a Certificate of Formation with the Texas Secretary of State. The Certificate of Formation lists the initial members (or owners) of the company.
Certificate of Filing: After the Certificate of Formation is filed with the Secretary of State’s office, the SOS provides the new business with a Certificate of Filing. It confirms that the Certificate of Formation was received and has been filed with the state.
EIN Letter: Most businesses also apply for a taxpayer ID number, also called an Employer Identification Number (EIN). When approved (instantly), the company can download their EIN letter. This letter, obviously, shows the company’s EIN. But it serves a more important role: it shows whether the LLC has chosen to be treated as a single-member LLC, partnership, or S-Corp by stating which tax form the business will be required to file. For an LLC filing as a partnership, it will state that the company needs to file form 1065; for an S-Corp, it will state that the company needs to file form 1120S. NOTE that an LLC filing as a partnership does not need any W-2 employees; the two (or more) partners can sign up for coverage if they work full-time in the business, and the requirements are even more relaxed with BCBSTX, which does not require the owners to work full-time and will accept a “one-person group” as long as there are two owners or an owner and full-time employee.
Partnership Agreement Addendum/Exhibit: Becasue a business owner must own at least 2% of the business in order to be eligible for coverage, and because the percentage ownership is not shown on the Certificate of Formation, it might be necessary to submit the partnership agreement or at least the addendum or exhibit from the partnership agreement showing the percentage ownership for each partner/owner. Click here for an example.