Texas Businesses Say Health Insurance Is Becoming Impossible to Manage

For many Texas businesses, health insurance was once seen as a valuable employee benefit. Today it's becoming one of their most unpredictable operating expenses.

Employers are being forced to absorb rising premiums, increase employee contributions, raise deductibles, or cut other spending just to keep their plans alive. At the same time, many employees are deciding that the coverage offered through work is still too expensive to enroll in.

A recent report from The Texas Tribune illustrated the problem through a restaurant operator in Waco. Kyle Citrano's family runs three restaurants and employs about 425 people. Roughly half of them work enough hours and have enough tenure to qualify for the company's health plan. The plan reportedly offers strong coverage. Only 19 employees enrolled.

Low participation then makes the economics of maintaining the group plan even harder for the employer. This is not an isolated problem affecting one restaurant — it's a warning about what's happening to employer-sponsored health insurance across Texas and the rest of the country.

Employer health costs are expected to rise again

The Business Group on Health projected that employer healthcare costs would rise by a median of 9% in 2026 before employers make any changes to their plans. Even after benefit adjustments and other cost-management efforts, employers still expected a median increase of 7.6%. They ranked healthcare cost and affordability — for both their organizations and their workers — among their most important concerns.

Other surveys reached similar conclusions. Mercer projected the average health benefit cost per employee would rise 6.7% in 2026, the largest increase in 15 years, and reported that health benefit expenses have been climbing faster than wages and general inflation.

These percentages can look manageable on a spreadsheet. But for a business covering dozens or hundreds of employees, another 7%, 9%, or 10% is a substantial new expense — and that money has to come from somewhere. It may come out of profit margin, or reduce what's available for hiring, raises, equipment, expansion, or bonuses. In many cases part of the increase is passed straight to workers through higher paycheck deductions, deductibles, and out-of-pocket costs.

A family health plan now costs nearly $27,000 a year

The average annual premium for employer-sponsored family coverage reached $26,993 in 2025, according to KFF. Workers contributed an average of about $6,850 toward those premiums through payroll deductions, and the employer paid the rest — making health insurance one of the largest costs of employing a worker.

And the cost doesn't end with the premium. Employees may still face deductibles, copays, coinsurance, and prescription expenses when they use the plan. For lower- and moderate-income workers, the employee share of the premium can eat a meaningful part of every paycheck, and adding a spouse or children pushes it significantly higher. That leaves employers in an uncomfortable spot: spending thousands per employee on a benefit some workers still consider unaffordable.

Texas employees are feeling the increases too

The Texas Tribune highlighted another example: Credit Human, a Texas-based credit union. According to the company's senior manager of human investments, healthcare expenses were rising faster than any other company cost — including wages. The company gave raises, but rising insurance premiums consumed part of the additional income employees were supposed to receive.

Employee premiums rose 15% during the current plan year. The company also saw roughly twice as many employees decline coverage while reporting they had no other insurance. Around 80% of eligible employees still participated, but the rising cost was starting to price out some of the company's lower-paid workers.

This shows how health insurance increases can quietly erase wage growth. An employer can give someone a raise, but the employee may not feel better off if more money is pulled from each paycheck for benefits at the same time. The business pays more, the employee pays more, the employee may face a larger deductible — and yet neither side necessarily feels the coverage has improved.

Why low participation creates problems

Traditional group health insurance generally works best when enough eligible employees participate. When participation is low, the employer may have fewer plan choices, face tougher pricing, or struggle to meet an insurer's participation requirements.

For SHOP coverage in Texas, HealthCare.gov lists a 75% minimum participation requirement, though an annual enrollment window lets eligible employers enroll without meeting the normal threshold, and participation math may exclude certain employees who have other qualifying coverage.

The Waco restaurant shows how hard participation can be in industries with younger employees, part-time schedules, high turnover, and varying incomes. Out of roughly 425 workers, only about half were eligible — and only 19 enrolled. That doesn't mean employees don't value healthcare. Some are covered by a spouse, parent, or government program; some believe they're healthy enough to risk going without; some look at the paycheck deduction and decide they can't afford it. Whatever the reason, low participation can leave an employer maintaining an expensive benefit that reaches only a small share of its workforce.

Traditional group insurance isn't always the right fit

Employer-sponsored group insurance remains extremely valuable for millions of Americans. It works particularly well for companies with stable workforces, strong participation, and the financial capacity to contribute meaningfully toward premiums.

But the traditional group model doesn't work equally well for every business. Restaurants, construction firms, hospitality businesses, retail operations, and similar employers often have large numbers of part-time, seasonal, younger, or frequently changing workers. A uniform group plan may not match the financial needs of that workforce — employees have different incomes, family sizes, medical needs, and preferences. A premium that seems reasonable to a highly paid manager can be completely unaffordable to an hourly employee.

Larger employers also face compliance requirements

The rules get more complicated as a company grows. Under the ACA, an employer generally becomes an applicable large employer (ALE) when it averaged at least 50 full-time employees, including full-time-equivalent employees, during the prior calendar year.

ALEs are generally expected to offer qualifying coverage that meets federal affordability and minimum-value standards to full-time employees and their dependents. An employer may face a shared responsibility payment if it fails to make a qualifying offer and at least one full-time employee receives a premium tax credit through the Marketplace.

What is driving the increases?

There's no single cause. The Business Group on Health reported employers are seeing greater use of expensive obesity medications, including GLP-1 drugs, along with higher cancer prevalence, increased use of mental health services, and greater need for chronic-condition management. Hospital prices, specialty medications, complex claims, and higher utilization all add to the total.

Texas employers and policymakers have also raised concerns about consolidation and transparency. When hospitals, provider groups, or healthcare middlemen gain more market power, employers may have less ability to negotiate prices, and a lack of clear claims and prescription pricing data makes it hard to see where healthcare dollars are going.

Hospitals offer a different perspective. The Texas Hospital Association has argued that consolidation can help financially struggling hospitals stay open by letting them share resources, and that hospitals face their own challenges — labor expenses, administrative costs, and what they consider insufficient insurance reimbursement. The system is complicated, but the outcome for employers is simple: the bill keeps rising.

The hidden effect on wages and hiring

Health insurance is part of an employee's total compensation, even when the worker never sees the employer's contribution. When coverage costs rise, employers have less to spend on other forms of pay. A company may delay a hire, offer a smaller raise, postpone an expansion, or pass higher costs to customers.

Employees usually see only the amount deducted from their paycheck. They may not realize their employer could also be paying hundreds or thousands of dollars a month toward the plan. That creates frustration on both sides: the employer feels it's spending heavily on benefits, the employee feels the insurance is too expensive — and both can be true at once.

What Texas business owners should review

Don't wait until renewal season to examine your benefit strategy. Work through this:

1. Look at participation, not just the offer. How many workers are eligible, how many actually enroll, and why eligible employees decline.
2. Map the real contributions. How much the company and its employees each pay, and whether the benefit is actually helping recruitment and retention.
3. Go beyond the monthly premium. Review deductibles, networks, prescription benefits, employee classifications, and participation requirements.
4. Check your federal obligations. Understand your ALE status and shared-responsibility exposure before restructuring anything.
5. Get qualified help before you change course. Any strategy involving employer reimbursements, individual policies, or changes to a group plan should be reviewed with qualified insurance, tax, and benefits professionals — improper arrangements can create problems for the company and its employees.

Some businesses will decide their existing group plan is still the best option. Others may need to restructure contributions, offer different plan choices, or investigate legally compliant alternatives. The objective isn't simply to find the cheapest plan — it's to build a benefit structure the business can sustain and employees can realistically afford.

Texas lawmakers are searching for solutions

The pressure has grown large enough to draw attention from both chambers of the Texas Legislature. State leaders have instructed lawmakers to explore ways to reduce healthcare costs before the next legislative session, with possible focus on industry consolidation, competition, and greater transparency around medical and prescription pricing.

The political interest reflects the level of public concern. A January Texas Politics Project poll cited by The Texas Tribune found that 89% of respondents were very or somewhat concerned about healthcare costs. This isn't simply an insurance-industry issue — it's a workforce issue, a small-business issue, and an affordability issue.

The real warning for Texas businesses

The Waco restaurant story captures the contradiction facing employers: a business can employ hundreds of people, offer health insurance, and still see only a small number enroll. That's not a successful benefit system — it's a sign that the connection between employment and affordable healthcare is under increasing strain.

Traditional group insurance will keep being an important solution for many companies. But owners shouldn't assume the same structure will work for every workforce simply because it's always been the standard. A plan has to make sense for the employer paying for it and the employees being asked to enroll. When businesses can't predict their costs and workers can't afford their share, the arrangement gets hard to sustain.

Texas businesses aren't saying employee health benefits no longer matter. They're saying the cost of providing them is becoming impossible to manage.