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Texas · small group, 2 to 50 employees · 2026 and 2027

Small Business Health Insurance in Texas: What Does It Cost, What Is Required, and Which Plan Fits My Team?

Written and reviewed by Dick Tracy, licensed health insurance broker (NPN 20414610) · Published October 16, 2026

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Quick answer Texas does not require a business with fewer than 50 full-time equivalent employees to offer health insurance, and there is no penalty for skipping it. At 50 or more, the federal employer mandate applies. Texas small group coverage is for employers with 2 to 50 employees, asks no health questions, and does not come in a group of one. Average employer coverage in Texas costs $8,543 a year for single coverage and $25,053 for a family (MEPS-IC, 2025, all firm sizes). For 2027, Texas insurers asked for an average small group increase of 16.9%, a request, not a final number. A group plan is not the only way to take care of your people. I educate, you decide.

I'm Dick Tracy, a health insurance broker. I'm licensed in Texas (NPN 20414610), one of 25 states I hold a license in, and I work with 80+ carriers. I am not local and I won't pretend to be: my office is in Buffalo, New York, and I work with Texas business owners by phone or Zoom. I came from the healthcare side of this business, so there is no gag clause on me. This page is for the owner with employees. If it is just you, start with my self-employed in Texas page; if you are paid on a 1099 with no employer plan, 1099 health insurance in Texas is yours. The biggest trap for an owner with a team: signing the first group quote because you think it is the only option. Sometimes the math doesn't math.

Sources: Texas Insurance Code 1501.002; AHRQ MEPS-IC via KFF State Health Facts, 2025; ACA Signups, 2027 Texas rate filings compiled from the federal Rate Review database, August 28, 2026.

Small business health insurance requirements in Texas: do I have to offer it?

With fewer than 50 full-time equivalent employees (FTEs), no. Texas law does not make you offer a plan or pay for one. The Texas Department of Insurance's small employer guide says it plainly: "The law doesn't require you to pay an employee's health plan premiums" (TDI). The only mandate is federal, and it starts at "an average of at least 50 full-time employees (including full-time-equivalent employees)" in the prior year (IRS). Part-time hours count toward that number, so do the count before you assume you are under it.

Sources: Texas Insurance Code 1501.002 (small employer: an average of at least two but not more than 50 employees on business days during the preceding calendar year, and at least two employees on the first day of the plan year); IRS, employer shared responsibility provisions.

At 50 or more, the 2027 IRS numbers: if you do not offer coverage and even one full-time employee gets a marketplace tax credit, the penalty is $3,780 per full-time employee for the year, not counting the first 30. If the coverage you offer is unaffordable or falls short, it is $5,670 for each full-time employee who gets that credit (IRS Rev. Proc. 2026-22). For 2026 those were $3,340 and $5,010 (IRS Rev. Proc. 2025-26). "Affordable" has a number too: for 2027 plan years it is 10.22% (IRS Rev. Proc. 2026-26), and for 2026 plan years, the employee's required contribution cannot be more than 9.96% of household income (IRS Rev. Proc. 2025-25). If you are near the line, my employer affordability calculator does the math.

Who counts for a Texas group plan: the statute's eligible employee works full time and "usually works at least 30 hours a week," and TDI says that if you offer a plan, you must offer it to every employee at 30 hours or more. Part-time, temporary, and seasonal workers are not eligible employees. For the 2 to 50 head count itself, TDI says it is "regardless of how many hours the employees work." A business that did not exist last year is sized by the average it "reasonably expects to employ" this year (Texas Insurance Code 1501.011).

How much does small business health insurance cost in Texas?

Here is the honest anchor: average annual premiums for private-sector employer coverage in Texas, from the federal employer survey. They cover employers of all sizes, so this is a benchmark, not a quote.

Source: Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey Insurance Component (MEPS-IC), via KFF State Health Facts, data year 2025: single, employee-plus-one, family. All firm sizes, per enrolled employee.

In monthly terms, single coverage runs about $712, with the employee paying about $137 of it. Family coverage runs about $2,088 a month, with the employee paying about $659. Those monthly numbers and the comparisons that follow are my arithmetic on the survey table. Texas sits about 5% under the national average on both single and family coverage, but Texas employees pay 32% of the family premium against 28% nationally, $7,913 a year against $7,314. The employer still carries $6,905 a year per person on single coverage alone.

What does the employer have to contribute? Texas law does not set a number. The statute lets the insurance company set a contribution requirement under its usual practice, as long as it applies the rule the same way to every small employer (Texas Insurance Code 1501.153), and TDI translates it: "your insurance company might require you to pay at least 50% of your employees' premiums." Participation is in the statute: coverage is available "if at least 75 percent of a small employer's eligible employees elect to participate" (Texas Insurance Code 1501.154), a company may offer a lower level, and TDI says employees with other coverage do not count against you. Get both rules in writing. My advice on a group plan: pick a flat dollar amount per person, not a percentage of premium, as long as it clears the company's contribution minimum. If you want the tax credit, the IRS generally requires a uniform percentage of at least 50%. Every employee is rated on their own age, so a percentage means your cost jumps with every older hire and every renewal. A flat amount is a number you can budget.

Texas small group rates for 2027: what insurers asked for

Texas passed the law to take rate review back from the federal government in 2021, and the federal government recognized the Texas program starting with the 2023 plan year. Insurers file with the Texas Department of Insurance under Insurance Code Chapter 1698, filings are due June 15, and the public record lives on the federal Rate Review site (TDI, rate review requirements). For 2027, ACA Signups, which compiles those filings, counted eight small group carriers in Texas. Three appear to be leaving, and the remaining five asked for an unweighted average increase of 16.9%, as of August 28, 2026. The same compilation put the individual market request at roughly 14.1%, its average across the filers that stated a change. Those are requests. Final 2027 numbers come later in the fall, and I will update this page when Texas posts them. For context, KFF found small group insurers nationally proposing a median increase of about 14% for 2027 (Peterson-KFF Health System Tracker, August 6, 2026). Texas asked for more than the middle of the country.

Source: ACA Signups, "2027 Rate Changes: Texas", compiled from the preliminary filings in the federal Rate Review database (ratereview.healthcare.gov) and posted August 28, 2026. "Requested" is the filing figure; Texas has not published an approved column. Carrier names come from the filings and are not a recommendation. The carrier-by-carrier small group table was published as an image, so this page prints only the averages.

How a small group plan is priced: no health questions. Under the federal rating rule (45 CFR 147.102) the premium can vary only by age, rating area, family size, and tobacco use, never by health or claims history. The oldest adult rate can be no more than three times the youngest. A young, healthy team gets credit for being young and zero credit for being healthy, which is why a small group quote is often too expensive for them.

Texas small business health insurance plans: the three routes I use

There is no single best plan, only a best route for your team. What kind of tank should we build?

Small group column: Texas Insurance Code 1501.002, 1501.154, 1251.252, 45 CFR 147.104 (guaranteed availability). Routes 2 and 3 describe my own practice; route 2 is explained on the ERISA cheat code page.

On route 3: a group plan is one design stretched over a 26-year-old who never sees a doctor and a 58-year-old with a specialist. Customized individual coverage for each person is often more cost-effective than a one-size-fits-all group plan, especially for a young, healthy crew of 2 to 15, and Texas gives that route an extra edge because a healthy person can be priced on their own health instead of the pool's. A couple of years ago I saved a business over $30,000 in a year by putting the routes side by side.

Arlington, Dallas, Houston, Austin, San Antonio: how your address prices the plan

Texas is cut into 27 rating areas for the individual and small group markets. Under the federal rule, a small group is priced by the rating area of the business's principal address, not where each employee lives. The same crew can be priced differently from a shop in Arlington and an office in Dallas.

Sources: CMS, Texas geographic rating areas (27 areas, individual and small group markets); 45 CFR 147.102 ("in the small group market, using the group policyholder's principal business address").

Which companies will quote your address is something I check case by case, and I don't recommend one over another on a web page. I don't have a Texas office, and I won't build a fake page for every city. One page, real numbers, and a phone or Zoom call when you want your own. In Houston and on your own? My Houston self-employed page covers the hospital systems there.

Affordable small business health insurance in Texas: which situation are you in?

SHOP and the small business tax credit in Texas: the reality

Texas has no state exchange, so SHOP, the small business side of the marketplace, runs through HealthCare.gov. There is no portal to enroll on. You enroll with the insurance company directly or with a SHOP-registered agent or broker, and you choose how much you pay toward premiums. To qualify you generally need 1 to 50 full-time equivalent employees, not counting owners, partners, or family members (HealthCare.gov, SHOP overview).

Here is the Texas catch. HealthCare.gov posts a SHOP medical plan file each year for the states where the federal government runs SHOP. The 2026 file holds plans in four states: Alabama, Montana, New Hampshire, and Wisconsin. Texas is not in it (HealthCare.gov, SHOP health plan information, 2026 file). HealthCare.gov also says enrolling through SHOP is "generally the only way for eligible small employers" to take the Small Business Health Care Tax Credit. Put those two facts together and a Texas employer starting coverage now should not budget around the credit.

The IRS rules, for the record: fewer than 25 FTEs, average wages under an inflation-adjusted limit (for tax years beginning in 2026 the credit starts to shrink once average wages pass $34,100 per IRS Rev. Proc. 2025-32, and the law ends it at double that figure), and a uniform employer contribution of at least 50% of the employee-only premium. The credit is worth up to 50% of the premiums you pay (35% for a tax-exempt employer), for two consecutive tax years (IRS, small business health care tax credit).

On Texas taxes: there is no state income tax. The Texas Constitution says the legislature "may not impose a tax on the net incomes of individuals" (Article 8, Section 24-a, approved by voters in November 2019, per the Texas Legislature's bill analysis), so any deduction for premiums is federal. Texas businesses pay the franchise tax instead: for 2026 and 2027 reports, no tax is due under $2,650,000 in revenue, and above it the rate is 0.375% for retail or wholesale and 0.75% for everyone else (Texas Comptroller). I found no Texas tax credit for a small business that buys health coverage. Loop in your CPA, I'm not one.

When someone leaves: COBRA and Texas state continuation

A group plan comes with an exit rule. Federal COBRA does not apply to a plan when the employer "normally employed fewer than 20 employees" in the prior year (29 U.S.C. 1161). Texas fills that gap with state continuation, which TDI says applies to employers of any size (TDI) but not to self-funded plans (TDI, continuation rights). The rules: three consecutive months of coverage before it ended, and not fired for cause (Texas Insurance Code 1251.252); a written request within 60 days of the later of the date coverage ends or the date of your notice (1251.253), which TDI says you owe within 30 days of the job ending; your contribution amount plus 2% of the group rate, first payment within 45 days of electing (1251.254); and nine months of coverage after the election when COBRA does not apply, or six more months after federal COBRA runs out (1251.255). The dollar version is on my COBRA cost in Texas page. On routes 2 and 3 the person owns the policy, so ask me how leaving the company works on each one.

Common questions about small business health insurance in Texas