(a) Insurance Code Chapter 1501, concerning Health Insurance Portability and Availability Act, and this subchapter regulate all health benefit plans sold to small employers, whether sold directly or through associations or other groupings of small employers.     
      (b) Except as otherwise provided, this subchapter applies to any health benefit plan providing health care benefits covering two or more employees of a small employer, whether provided on a group or individual franchise insurance policy basis, regardless of whether the policy was issued in this state, if the plan meets one of the following conditions:      
        (1) a portion of the premium or benefits is paid by a small employer;       
        (2) the health benefit plan is treated by the employer or by a covered individual as part of a plan or program for the purposes of the United States Internal Revenue Code of 1986, 26 U.S.C. §106 (concerning Contributions by Employer to Accident and Health Plans) or §162 (concerning Trade or Business Expenses);       
        (3) the health benefit plan is a group policy issued to a small employer; or       
        (4) the health benefit plan is an employee welfare benefit plan under 29 C.F.R. §2510.3-1(j) (concerning Employee Welfare Benefit Plan).       
      (c) For an employer that was not in existence the previous calendar year, the determination of whether the employer is a small employer is based on the average number of employees the employer reasonably expects to employ on business days in the calendar year in which the determination is made.     
      (d) The provisions of Insurance Code Chapter 1501 and this subchapter apply to a health benefit plan provided to a small employer or to the employees of a small employer without regard to whether the health benefit plan is offered under or provided through a group policy or trust arrangement of any size sponsored by an association or discretionary group.     
      (e) If a small employer or the employees of a small employer are issued a health benefit plan under the provisions of Insurance Code Chapter 1501 and this subchapter, and the small employer, due to an increase or decrease in the number of employees, ceases to meet the definition of a small employer, the provisions of Insurance Code Chapter 1501 and this subchapter continue to apply to that particular health plan, subject to the provisions of §26.15 of this title (relating to Renewability of Coverage and Cancellation). A health carrier providing coverage to an employer must, within 60 days of becoming aware that the employer no longer meets the definition of small employer, but not later than the first renewal date occurring after the small employer has ceased to be a small employer, notify the employer of its change in status. The carrier must also notify the employer that the protections provided to small employers under Insurance Code Chapter 1501, and this subchapter will cease to apply to the employer if the employer fails to renew its current health benefit plan; fails to comply with the contribution, minimum group size, or minimum participation requirements of this subchapter; or elects to enroll in a different health benefit plan. The notice requirement of this subsection does not apply to a health carrier electing to issue coverage to a group consisting of one employee.     
      (f) If a small employer has employees in more than one state, the provisions of Insurance Code Chapter 1501 and this subchapter applicable to small employer plans, including provisions regarding marketing and rates, apply to a health benefit plan issued to the small employer if:      
        (1) the majority of employees are employed in this state on the issue date or renewal date; or       
        (2) the primary business location is in this state on the issue date or renewal date and no state contains a majority of the employees.       
      (g) A carrier licensed in this state that issues a certificate of insurance covering a Texas resident is responsible for ensuring that the certificate complies with applicable Texas insurance laws and rules, including Senate Bill 1264, 86th Legislature, 2019, and other mandated benefits, regardless of whether the group policy underlying the certificate was issued outside the state.     
      (h) A small employer nonfederal governmental employee health benefit plan that is not self-funded is subject to the Insurance Code and this title, as applicable, including Chapter 1501 and this chapter.     
      (i) This chapter is applicable to an insurance policy, evidence of coverage, contract, or other document that is delivered, issued for delivery, or renewed on or after September 1, 2017. An insurance policy, evidence of coverage, contract, or other document that is delivered, issued for delivery, or renewed prior to September 1, 2017, is subject to the rules in effect at the time the insurance policy, evidence of coverage, contract, or other document was delivered, issued for delivery, or renewed.     
     Source Note:        The provisions of this §26.5 adopted to be effective December 30, 1993, 18 TexReg 9375; amended to be effective April 9, 1996, 21 TexReg 2648; amended to be effective March 5, 1998, 23 TexReg 2297; amended to be effective April 6, 2005, 30 TexReg 1931; amended to be effective May 17, 2017, 42 TexReg 2539; amended to be effective July 12, 2023, 48 TexReg 3666