Deciding whether to offer health insurance is a major decision for most employers. It can factor into your bottom line and your ability to attract employees.
There are three ways you can provide health insurance or help your employees get health insurance.
Buy a group health plan
You can buy health insurance directly from an insurance company or agent.
Most insurance companies require at least 75% of your full-time employees to participate in your health plan. Employees who have other health coverage don’t count.
Group health plans have different state and federal requirements depending on the employer’s size.
- Small employer plans are for employers with 50 or fewer employees. These plans must cover benefits required by state and federal law. Premiums for small employer plans are mostly based on the age of employees and don't vary based on health status. Learn more about small employer plans.
- Large employer plans are for employers with more than 50 employees. Premiums are based on the employer group's claim history, so they reflect the collective health of the employees. Large employer plans (except consumer choice plans) must offer benefits required by state law.
- Association health plans allow employers who are members of an eligible group to buy health insurance as a larger group. The group might get lower premiums because the cost is spread across more people.
More about association plans
The policyholder of an association plan is the association – not the employers. Depending on how the association is set up, employers may have limited control over benefits, administration, terminating or renewing the policy, and whether to change insurance companies. Employers should review contracts to make sure they understand the terms and conditions.
There are four types of association plans:
- Traditional association plans allow employers to buy health insurance together if the association meets state requirements. Coverage and rating requirements apply to each employer plan within the association. For example, an association plan issued to a small employer is subject to federal rating standards and essential health benefit requirements.
- Bona fide employer association plans allow a group of employers to be treated as a single large employer when buying insurance together if the group meets certain state and federal requirements.
- Cooperatives and coalitions are groups of large or small employers, or both, that are formed to buy health insurance. Employers must usually agree to stay in a cooperative for at least two years.
- Professional employer organizations (also known as staff leasing companies) can buy insurance for their employers as a single large employer under Texas law. Other federal requirements may apply.
Self-fund a health plan
Self-funding means you pay all your employee’s health claims instead of paying an insurance company. An employer can self-fund alone or with other employers. This is also called “self-insuring.”
Single employer welfare benefit plan
Most large employer health plans are self-funded. The federal Department of Labor regulates self-funded single employer plans under the Employee Retirement Income Security Act (ERISA). These plans aren’t subject to state insurance laws. TDI does regulate the stop-loss coverage that self-funded plans often buy.
Multiple employer welfare arrangements (MEWAs)
If you form a multiple employer welfare arrangement (MEWA) with other employers, the health care expenses are pooled across all employers. MEWAs are employers in the same trade or industry who formed an association to buy insurance.
MEWAs must have a certificate of authority from TDI.
Professional employer organizations
Professional employer organizations can self-fund their benefits if they get approval from TDI and meet federal requirements.
Help employees buy their own coverage
Small employers can contribute money to help their employees buy their own health insurance.
Employers can also reimburse employees for medical expenses by contributing to health reimbursement accounts (HRA).