(a) A small employer carrier that offers coverage to a small employer and its employees must offer coverage to each eligible employee and to each dependent of an eligible employee. Except as provided in subsection (b) of this section, the small employer carrier must provide the same health benefit plan to each employee or dependent eligible for coverage.
(b) If elected by the small employer, a small employer carrier may offer one or more health benefit plans, provided that each eligible employee may choose any of the plans offered. Except as provided in Insurance Code Chapter 1501 (concerning Health Insurance Portability and Availability Act) with respect to an affiliation period or exclusions for preexisting conditions, the choice among benefit plans may not be limited, restricted, or conditioned based on the risk characteristics of each employee or dependent eligible for coverage.
(c) A small employer carrier may require each small employer that applies for coverage, as part of the application process, to provide a complete list of employees, eligible employees, and dependents of eligible employees. The small employer carrier may also require the small employer to provide reasonable and appropriate supporting documentation to verify the information required under this subsection, and to confirm the applicant's status as a small employer. The small employer carrier must make a determination of eligibility within five business days of receipt of any requested documentation. A small employer carrier may not condition the issuance of coverage on an employer's production of a particular document, where the employer can otherwise provide the information required by this section. Similarly, if a particular document an employer produces does not reasonably evidence the employer's compliance with this subsection, the employer must produce other documentation to satisfy the requirements. Examples of the types of reasonable and appropriate supporting documentation that a small employer carrier may request from an employer as needed to fulfill the purposes of this subsection are:
  (1) a W-2 Summary Wage and Tax Form or other federal or state tax records;
  (2) a loan agreement;
  (3) an invoice;
  (4) a business check;
  (5) a sales tax license;
  (6) articles of incorporation or other business entity filings with the secretary of state;
  (7) assumed name filings;
  (8) professional licenses; and
  (9) reports required by the Texas Workforce Commission.
(d) A small employer carrier may not deny two individuals who are married the status of eligible employee solely on the basis that the two individuals are married. The small employer carrier must provide a reasonable opportunity for the individuals to submit evidence as provided in subsection (c) of this section to establish each individual's status as an eligible employee.
  (1) A small employer carrier must provide married eligible employees of the same employer the option to have one spouse be treated under a small employer health benefit plan as an employee, and the other spouse treated as an employee or alternatively as the dependent of the other employee.
  (2) A child of either of the two individuals may only be covered under the same small employer health benefit plan as a dependent by one of the two individuals.
  (3) An election by a spouse to be treated as a dependent under this subsection does not impact the individual's status as an eligible employee for any other purpose under Insurance Code Chapter 1501, except that the individual may be treated as a dependent for purposes of employer premium contributions.
(e) A small employer carrier must secure a waiver with respect to each eligible employee and each dependent of the eligible employee who declines an offer of coverage under a health benefit plan provided to a small employer. If a small employer elects to offer coverage through more than one small employer carrier, waivers are only required to be signed if the individual is declining all offered plans. The small employer carriers may enter into an agreement designating which small employer carrier will receive and retain the waiver. Waivers must be maintained by the small employer carrier for a period of six years. The waiver must be signed by the employee (on behalf of the employee or dependent) and must certify that the individual who declined coverage was informed of the availability of coverage under the health benefit plan. Receipt by the small employer carrier of a facsimile transmission of the waiver is permissible, provided that the transmission includes a representation from the small employer that the employer will maintain the original waiver on file for a period of six years from the date of the facsimile transmission. The waiver form must:
  (1) require that the reason for declining coverage be stated on the form;
  (2) include a written warning of the penalties imposed on late enrollees; and
  (3) include a statement that the employee and dependents were not induced or pressured by the small employer, agent, or health carrier into declining coverage, but elected of their own accord to decline the coverage.
(f) An agent must notify a small employer carrier, before submitting an application for coverage with the health carrier on behalf of a small employer or employee of a small employer, of any circumstances that would indicate that the small employer has induced or pressured the employee or dependent to decline coverage due to the individual's risk characteristics.
(g) New entrants in a health benefit plan issued to a small employer group must be offered an opportunity to enroll in the health benefit plan currently held by the employer group or be offered an opportunity to enroll in the health benefit plan if the plan is provided through an individual franchise insurance policy, or if more than one plan is available. If a small employer carrier has offered more than one health benefit plan to eligible employees of a small employer group under subsection (b) of this section, the new entrant must be offered the same choice of health benefit plans as the other employees (members) in the group. A new entrant who does not exercise the opportunity to enroll in the health benefit plan within the period provided by the small employer carrier may be treated as a late enrollee by the health carrier, provided that the period provided to enroll in the health benefit plan complies with subsection (h) of this section.
(h) Periods provided for enrollment in and application for any health benefit plan provided to a small employer group must comply with the following:
  (1) the initial enrollment period must extend at least 31 consecutive days after the date the new entrant begins employment or, if the waiting period exceeds 31 days, at least 31 consecutive days after the date the new entrant completes the waiting period for coverage;
  (2) the new entrant must be notified of his or her opportunity to enroll at least 31 days in advance of the last date enrollment is permitted;
  (3) the new entrant's application for coverage will be considered timely if the application is submitted within the initial enrollment period:
    (A) in person;
    (B) by mail, postmarked by the end of the specified period; or
    (C) in an alternative method normally accepted by the small employer carrier, including facsimile transmission (fax), email, or web-based application; and
  (4) the small employer carrier must provide an open enrollment period of at least 31 consecutive days on an annual basis.
(i) A small employer may establish a waiting period in accordance with Insurance Code §1501.156 (concerning Employee Enrollment; Waiting Period) that must not exceed 90 days. A small employer carrier may not apply a waiting period, elimination period, or other similar limitation of coverage, other than an exclusion for preexisting medical conditions or affiliation period consistent with Insurance Code §1501.102 (concerning Preexisting Condition Provision) and §1501.104 (concerning Affiliation Period), with respect to a new entrant, that is longer than the waiting period established by the small employer.
(j) New entrants in a health plan issued to a small employer group must be accepted for coverage by the small employer carrier without any restrictions or limitations on coverage related to the risk characteristics of the employees or their dependents, except that a health carrier may exclude coverage for preexisting medical conditions or impose an affiliation period, to the extent allowed under Insurance Code Chapter 1501.
(k) A small employer carrier may assess a risk load to the premium rate associated with a new entrant, consistent with the requirements of Insurance Code Chapter 1501, Subchapter E (concerning Underwriting and Rating of Small Employer Health Benefit Plans) and this chapter. The risk load must be the same risk load charged to the small employer group immediately before acceptance of the new entrant into the group.

Source Note: The provisions of this §26.7 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 December 6, 2010, 35 TexReg 10768; amended to be effective May 17, 2017, 42 TexReg 2539