(a) A small employer carrier must issue a health benefit plan to any small employer that elects to be covered under the plan and agrees to satisfy other requirements of the plan factors.
(b) Health carriers may require small employers to answer questions designed to determine the level of contribution by the small employer, the number of employees and eligible employees of the small employer, and the percentage of participation of eligible employees of the small employer. In this section, an "eligible employee" does not include employees within their waiting or affiliation period for percentage of participation requirement purposes.
(c) Availability of coverage under a small employer health benefit plan is subject to the minimum participation requirements of Insurance Code §1501.154 (concerning Minimum Participation Requirement) and §1501.155 (concerning Exception to Minimum Participation Requirement). A small employer that has only two eligible employees will be subject to a 100 percent participation requirement.
(d) A health carrier must treat all similarly situated small employer groups in a consistent and uniform manner when terminating health benefit plans due to a participation level of less than the qualifying participation level or group size.
(e) If a small employer fails to meet the qualifying minimum participation requirement for a small employer health benefit plan for six consecutive months, the health carrier may terminate coverage under the plan on the first renewal date following that period. The termination must conform to the terms and conditions of the plan concerning termination for failure to meet the qualifying minimum participation requirement and in accordance with Insurance Code §§1501.108 - 1501.111 (concerning Renewability of Coverage; Cancellation; Refusal to Renew; Discontinuation of Coverage; Notice to Covered Persons; and Written Statement of Denial, Cancellation, or Refusal to Renew Required) and §26.15 of this title (relating to Renewability of Coverage and Cancellation).
(f) In determining whether an employer has the required percentage of participation of eligible employees, if the percentage of eligible employees is not a whole number, the result of applying the percentage to the number of eligible employees must be rounded down to the nearest whole number. For example, 75 percent of five employees is 3.75, so 3.75 would be rounded down to three, and 75 percent participation by a five employee group will be achieved if three of the eligible employees participate.
(g) If a small employer fails to meet, for six consecutive months, the qualifying minimum group size requirement set forth in Insurance Code Chapter 1501 (concerning Health Insurance Portability and Availability Act) for a small employer health benefit plan, the health carrier may terminate coverage under the plan no earlier than the first day of the next month following the end of that period. The termination must conform to the terms and conditions of the plan concerning termination for failure to meet the qualifying minimum group size requirement and in accordance with Insurance Code §§1501.108 - 1501.111 and §26.15 of this title.

Source Note: The provisions of this §26.8 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 13, 2012, 37 TexReg 3415; amended to be effective May 17, 2017, 42 TexReg 2539