(a) The membership of a health group cooperative may consist of:
  (1) only small employers;
  (2) only large employers;
  (3) small and large employers;
  (4) small employers and eligible single-employee businesses;
  (5) large employers and eligible single-employee businesses; or
  (6) small employers, large employers, and eligible single-employee businesses.
(b) To be eligible to arrange for coverage in accordance with Insurance Code §1501.058 (concerning Powers and Duties of Cooperatives), a health group cooperative must, at the end of its initial open enrollment period, have at least 10 participating employers. A health group cooperative must maintain at least 10 participating employers to continue eligibility for coverage. If the health group cooperative drops below 10 participating employers, it must add additional participating employers by the end of the next open enrollment period. If the health group cooperative does not have at least 10 participating employers by the beginning of the next open enrollment period, the health group cooperative must immediately notify the participating employers of the potential for nonrenewal under this section. If the health group cooperative does not have at least 10 participating employers by the end of the next open enrollment period, the health carrier may elect to immediately cease providing coverage to the health group cooperative.
(c) Subject to the requirements of Insurance Code §1501.101 (concerning Geographic Service Areas), and the limitations identified under subsections (d) and (e) of this section, a health group cooperative:
  (1) must allow any small employer to join the cooperative and enroll in health benefit plan coverage during the initial and annual open enrollment periods unless the cooperative consists of only large employers;
  (2) may allow eligible single-employee businesses to join the cooperative and enroll in health benefit plan coverage during the initial and annual open enrollment periods, if it has made the election in compliance with Chapter 26, Subchapter D, Division 2 of this title (relating to Single-employee Business Participation in Health Group Cooperatives); and
  (3) may allow a large employer to join the cooperative and enroll in health benefit plan coverage during the initial enrollment and annual open enrollment periods.
(d) A health group cooperative that has elected to limit membership to 50 eligible employees and has filed the election with TDI as required by §26.401(e) of this title (relating to Establishment of Health Group Cooperatives) may decline to allow a small employer to join the cooperative if, after the small employer has joined the cooperative, the total number of eligible employees employed on business days during the preceding calendar year by all small employers participating in the cooperative would exceed 50.
(e) A health group cooperative may restrict its membership to small and large employers within a single industry grouping as defined by the most recent edition of the United States Census Bureau's North American Industry Classification System.
(f) A health group cooperative may not use risk characteristics of an employer or employee to restrict or qualify membership in the health group cooperative.
(g) An employer's participation in a health group cooperative is voluntary, but an employer electing to participate in a health group cooperative must, through a contract with the health group cooperative, commit to purchasing coverage through the health group cooperative for two years, except as provided for in subsection (h) of this section.
(h) A contract between an employer and a health group cooperative must allow an employer to terminate without penalty its health benefit plan coverage with a health group cooperative before the end of the two-year minimum contractual period required by subsection (g) of this section if it can demonstrate to the health group cooperative that continuing to purchase coverage through the cooperative would be a financial hardship in accordance with subsection (i) of this section.
(i) The contract between an employer and a health group cooperative may define what constitutes a financial hardship for the purposes of subsection (h) of this section. If the contract does not define the term, an employer may demonstrate financial hardship if it can show that at the end of the immediately preceding fiscal quarter, or on receipt of notice of a rate increase, the premium cost to the employer, as a percentage of the employer's gross receipts, increased by a factor of at least .50.

Source Note: The provisions of this §26.402 adopted to be effective August 31, 2004, 29 TexReg 8360; amended to be effective January 31, 2006, 31 TexReg 512; amended to be effective March 6, 2008, 33 TexReg 2031; amended to be effective May 17, 2017, 42 TexReg 2539