Small business health insurance in Texas

How Texas's market is set up

Texas uses the federally facilitated marketplace, so employees shop at HealthCare.gov (KFF, marketplace types). Fifteen insurers offer individual marketplace plans in Texas for 2026 — the most of any state (KFF, insurer participation, June 2026). Premiums follow the federal defaults: a 3:1 age curve and tobacco rating up to 1.5:1 (CMS, State Specific Rating Variations).

Under Texas Insurance Code §1501.002, a small employer is one that employed an average of at least two but not more than 50 employees on business days in the preceding calendar year, and §1501.151 requires a small employer health benefit plan issuer to issue the plan a small employer chooses — guaranteed issue. A sole owner with no employees is outside the small-group market; a 60-person company is in the large-group market. The state has 254 counties, and premiums vary by rating area.

What a Texas group plan costs in 2026

Texas does not publish a single approved statewide average the way prior-approval states do, so the cleanest sourced signal is the benchmark: KFF's county-weighted second-lowest-cost Silver premium for a 40-year-old in Texas was $489 in 2025 and $661 in 2026 — a rise of roughly a third in one year. Nationally, the median proposed 2026 marketplace increase was 18% across 312 insurers (Peterson-KFF Health System Tracker), so Texas sat well above the typical state.

That is the individual market; a group renewal in Texas is a separate negotiation with your carrier. But the two are linked for an ICHRA employer, because the benchmark is what the affordability test uses. A higher benchmark means a higher allowance is needed to make the offer affordable for an older employee — and it also means the individual plan an employee buys with your allowance costs more.

Your four real options as a Texas employer

There are four ways to offer health insurance to employees in Texas, and the state's market rules change how each one performs.

• A small-group plan (2–50 employees) through a carrier or the SHOP route. Predictable coverage, age-rated premiums, annual renewals, participation and contribution minimums.
• A PEO, which pools your staff into its own group plan and bundles payroll and HR for a fee on top of premiums. See our ICHRA vs PEO comparison.
• A taxable stipend. Simple, but it is wages: you owe employer payroll tax on it, the employee owes income tax, and it does not count as an offer of coverage. See our guide to health insurance stipends.
• An ICHRA — a fixed, tax-free monthly allowance employees use to buy their own individual plan on or off HealthCare.gov. No participation minimum, no renewal negotiation, and the allowance is a number you choose.

Texas has not expanded Medicaid — what that means for your lowest-paid staff

Texas is one of ten states that have not adopted Medicaid expansion (KFF, August 2026). In an expansion state, an employee earning under about 138% of the federal poverty level is usually on Medicaid and outside the ICHRA question altogether. In Texas, a childless adult at that income has no Medicaid path, and adults below 100% of poverty fall into the coverage gap — not eligible for marketplace subsidies either. For a Texas restaurant, cleaning company, or trucking operation with hourly staff, that makes an ICHRA allowance unusually consequential: for some employees it is the only funded route to coverage. It also means the affordability check has to be done carefully, because an affordable offer removes an employee's premium tax credit and the offer has to be genuinely usable at their wage.

The Texas ICHRA credit bill: SB 1949

In the 2025 session, SB 1949 (89th Legislature) proposed a sales-and-use tax refund or franchise tax credit for small employers that contribute to an ICHRA: $400 per covered individual per year, capped at tax owed, for employers with 1–50 employees who adopt an ICHRA instead of traditional group coverage and contribute at least what they previously contributed (Texas Legislature Online, SB 1949 introduced text). The introduced text set contributions from January 1, 2026 and claims from January 1, 2027.

We could not confirm from the Legislature's bill-history record whether SB 1949 was passed and signed, so treat it as a proposal until you verify the enrolled status with the Texas Comptroller or your tax adviser. Do not plan on a credit that has not been confirmed. Our ICHRA state tax credits page tracks Indiana, Ohio, Georgia, and Texas.

Setting an ICHRA allowance in Texas

Texas rates individual premiums on the federal 3:1 age curve, so a 64-year-old's premium can be up to three times a 21-year-old's for the same plan. Federal ICHRA rules let you vary the allowance by age up to that same 3:1 ratio, and in an age-rated state that is usually the fair design: a flat allowance treats a 25-year-old and a 60-year-old very differently in real purchasing power.

Location matters too. Texas has 254 counties spread across many rating areas, and a Houston premium is not a Lubbock premium. In our 2026 calculator dataset (the figures shown on our ICHRA in Texas page), the lowest-cost Silver plan for a 40-year-old in Texas averages about $700/month, ranging from $481 to $953 across the state's 254 counties. That spread is why an allowance set from a statewide average fails the ACA affordability test in some counties and over-funds others.

Our ICHRA calculator uses those county-level 2026 lowest-cost Silver premiums by ZIP code, so you can see the affordability line for each employee before you set a number. For 2026, an offer is affordable when the employee's cost for the lowest-cost Silver plan, minus your allowance, is no more than 9.96% of the applicable income measure (IRS).

Group plan vs. ICHRA for a Texas employer

With 15 carriers on the marketplace, Texas employees have more individual-plan choice than anywhere else in the country — the strongest argument for an ICHRA here. The counter-argument is the 2026 benchmark jump, which raises the allowance needed to clear affordability for older staff. The table puts the two models side by side in Texas terms.

How to set up an ICHRA in Texas

The setup is the same federal process as anywhere: adopt a written plan document, define employee classes, set the allowance (by age band and rating area if you choose), deliver the required employee notice at least 90 days before the plan year begins, and reimburse against proof of individual coverage. Give employees a clear enrollment path — HealthCare.gov or an off-exchange carrier — and time the launch to a window when they can actually enroll: the annual open enrollment, or the special enrollment period that a new ICHRA offer triggers.

Who we are

The ICHRA Broker is licensed in New York and works with employers nationwide, including Texas. We design, set up, and support ICHRAs for small and mid-sized employers — the county-by-county allowance work, the affordability testing, and the enrollment support employees need. Free quote, no obligation. This page is education, not tax, legal, or insurance advice.

Sources

• Texas Insurance Code §1501.002 (small employer: 2–50) and §1501.151 (guaranteed issue), statutes.capitol.texas.gov.
• KFF, State Health Insurance Marketplace Types (Texas: federally facilitated).
• KFF, Number of Issuers Participating in the Individual Marketplace (Texas: 15 in 2026) and How Has Insurer Participation Changed in 2026 (June 2026).
• KFF, Marketplace Average Benchmark Premiums (Texas, age 40: $489 in 2025; $661 in 2026).
• Peterson-KFF Health System Tracker, How Much and Why ACA Marketplace Premiums Are Going Up in 2026 (national median 18%).
• KFF, Status of State Medicaid Expansion Decisions (August 2026): Texas not adopted.
• Texas Legislature Online, SB 1949 (89R) introduced text.
• CMS, Market Rating Reforms — State Specific Rating Variations (Texas: federal defaults).
• The ICHRA Broker calculator dataset: 2026 lowest-cost Silver premiums by ZIP.