Are Employers Required to Provide Health Insurance in Texas?

Running a business in Texas comes with a long list of responsibilities. One question we hear often is, “Are employers required to provide health insurance in Texas?” The short answer: no, not at the state level. Texas does not have its own law mandating employer-sponsored health insurance. But that’s not the end of the story.

Federal laws, particularly the Affordable Care Act, still apply. Over 50 FTE, you will have federal obligations related to health insurance coverage. And even if you’re not required to offer a plan, there are still good reasons to consider it.

In this article, we’ll walk you through what Texas employers need to know about employer health insurance, how federal law plays a role, and what to consider when deciding if coverage makes sense for your company.

Understanding the Affordable Care Act (ACA) Requirements

The Affordable Care Act (ACA) sets the standard for employer-sponsored health insurance nationwide. If you’re a large employer, officially called an “applicable large employer” or ALE, you’re subject to the ACA’s Employer Shared Responsibility Provision.

What is an ALE?

Any business that has 50 or more full-time employees (or full-time equivalent employees) is considered an ALE. If you fall into this category, you must offer affordable, minimum-value health insurance coverage to  allof your full-time employees and their dependents.

What qualifies as a full-time employee?

According to the ACA, a full-time employee works an average of at least 30 hours per week or 130 hours per month. You’ll also need to track the hours of part-time employees to calculate your total full-time equivalent (FTE) count.

What happens if you don’t offer coverage?

ALEs that don’t meet their coverage obligations will face penalties. These fines can be significant, especially when applied across multiple employees. That’s why it’s critical to understand the ACA rules and stay compliant.

To meet your reporting requirements, you’ll also need to file IRS forms 1095-C and 1094-C. These forms document the health benefits you offered (or didn’t) and who was covered throughout the year. Accurate reporting is essential to avoid IRS penalties and demonstrate compliance.

Small Business Health Insurance Requirements in Texas

Now let’s turn the spotlight on smaller companies. Are small businesses required to offer health insurance in Texas? No. If your company has fewer than 50 full-time equivalent employees, you are not legally required by the federal government or the state of Texas to provide health coverage.

That said, many small employers still choose to offer group health insurance. Why? Because it can give you a competitive edge when recruiting and retaining talent. Employees place a high value on health benefits, and your offer to provide group health insurance may be the difference between keeping a great hire or losing them to a competitor.

Offering health coverage can also bring tax advantages. Premium contributions made by the employer are typically tax-deductible. And if you have fewer than 25 employees and meet income and contribution requirements, you may qualify for a federal tax credit.

Not sure if your business qualifies for a group plan? Our overview of small group insurance criteria in Texas can help clarify your options.

Key Considerations for Texas Employers Offering Health Insurance

Even if you’re not required to provide health insurance, offering a plan could be one of the smartest investments you make in your business. Here’s what to think through:

Cost and Budget

Start by evaluating what you can afford. Group plans come in many forms; PPOs, HMOs, high-deductible health plans, and costs vary widely. Some employers cover 100% of premiums, while others split costs with employees. Decide what level of contribution works for your budget.

Employee Needs and Expectations

Consider your team. Are they full-time employees looking for comprehensive benefits? Do they have families to cover? Surveying your staff can help you choose a plan that meets their needs.

Recruiting and Retention

Health benefits can be a deciding factor for job seekers. In competitive job markets like Austin, Dallas, Houston, and San Antonio, offering coverage could be what sets you apart. Employees who feel supported are more likely to stay long-term, reducing turnover and training costs.

Plan Options and Negotiation

You don’t have to navigate the complicated world of benefits alone. A broker can help you evaluate group health insurance options, negotiate rates, and explore supplemental benefits like dental, vision, or disability insurance.

Making It More Affordable

Group purchasing is one strategy to reduce costs. The more employees you cover, the better your bargaining power. Choosing a high-deductible plan paired with a Health Savings Account (HSA) is another way to control premiums.

Need help determining your options? Our guide to small business health insurance lays out the benefits of group coverage, even for smaller employers.

Compliance and Reporting for Employers

Compliance doesn’t end after you choose a plan. If you’re an ALE, you’ll need to document and report your health insurance coverage to the IRS each year.

Key Reporting Forms:

• Form 1095-C: Sent to each full-time employee, showing whether they were offered health coverage.
• Form 1094-C: Sent to the IRS, summarizing your coverage offers and compliance.

Ongoing Tracking

Keep accurate records of hours worked by all employees. Monitor changes in full-time status, benefit enrollments, and terminations. Failing to track properly can lead to missed deadlines or incorrect filings.

Avoiding Penalties

The IRS assesses penalties for ALEs who fail to offer affordable coverage or report it correctly. Investing in a trusted payroll and benefits system, or partnering with a knowledgeable broker, can help you stay on track.

If you're unsure about what qualifies as a full-time employee under the ACA, or what minimum coverage standards look like, it’s worth seeking expert guidance.

Is Health Insurance the Right Fit for Your Business?

Let’s go back to the original question: are employers required to provide health insurance in Texas? The state doesn’t mandate it, but the federal government does, depending on your size.

That means you’ll need to know where your business falls under ACA rules, what your responsibilities are, and what kind of health benefits will work for your team. Whether you're required to offer coverage or simply exploring your options, employer health insurance can be a strategic move that supports growth, retention, and employee well-being.

To recap:

• Large employers (50+ FTEs) must provide health insurance under the ACA or face penalties.
• Small employers (fewer than 50 FTEs) are not required to offer coverage but often choose to for competitive and tax reasons.
• Offering group health insurance can support retention, boost morale, and give your business a hiring edge.

Still have questions? Contact us for a free consultation. We’ll help you understand your obligations, evaluate affordable options, and build a benefits strategy that works for your business.