TDI addresses this question on its website: https://www.tdi.texas.gov/health/faqs.html
Guaranteed Issuance and Renewability for Mom and Pop Groups (expanded December 1, 2016)
Federal law does not consider a family-run business consisting of a husband and wife to be a small group health plan unless the business employs at least one common law employee who is neither spouse. Based on federal guidance, may a small group carrier refuse to issue new coverage or non-renew existing coverage for a small group that does not meet this federal definition?
No. Under Texas law, a small group carrier must issue coverage, consistent with TIC §1501.151, to a small employer with two or more employees, even if the employees are married to one another. A small group carrier may not non-renew coverage for an existing small group because the state and federal definitions of small group differ. In addition, TIC §1501.108 gives a covered employer the right to renew its group health coverage unless the employer fails to comply with the terms of the plan.
Federal law (42 US Code 300gg-91(e)(1)(B)) allows a state to elect to regulate coverage offered to very small groups as coverage in the small group market, and Texas considers a group of two eligible employees to be a small group, regardless of marital status. The Texas Insurance Code does not exclude spouses from the definition of “eligible employee” or exclude such employees in defining “small employer,” and consistent with this 28 TAC §26.7(d), prohibits a small group carrier from denying two individuals who are married the status of eligible employee solely on the basis that the two individuals are married. Commissioner’s Bulletin # B-0035-01 provides additional guidance regarding this requirement.