A Texas small employer health benefit plan has covered a group for several years. One covered employee is diagnosed with cancer, and at renewal the issuer refuses to renew the group's coverage. Under the Texas small employer health benefit plan statute, the issuer's action is:

Why C is correct

Under TIC 1501, a small employer health benefit plan is guaranteed renewable: the issuer must renew at the employer's option unless one of the statutory grounds applies, such as nonpayment of premium, fraud or intentional misrepresentation, the employer's failure to comply with the plan's terms, or the employer no longer meeting the eligibility requirements. A covered employee's diagnosis is not among those grounds, and offering to renew at a higher rate does not convert a wrongful nonrenewal into a lawful one.

Why the other options are wrong

• A) A diagnosis does not materially change the risk in the sense the statute requires; guaranteed renewal absorbs exactly that event.
• B) A renewal offer conditioned on a rate the employer never agreed to is not a lawful renewal of the existing plan.
• D) The protection is not limited to cases where the affected employee remains employed; it runs to the plan itself.

Memory hook

Small group coverage renews; only the statute's listed grounds stop it.