The Facts
  • In FY 2011, ERS provided insurance benefits to more than a half million state employees, retirees, and dependents.
  • Texas pays the full cost of the premium for state employees and half the cost of the premium for an employee’s dependents- a total appropriation of about $2.4 billion for the 2010-11 biennium.
  • Texas state employees also have the option of participating in the TexFlex program-a Flexible Spending Account to which they make pre-tax savings deposits for out-of-pocket health and child care expenditures.
  • In Plan Year 2004, the premium for employee-only benefits was $300 per month, for Plan Year 2007, the monthly cost for the employee-only benefit increased 20% to $360 per month, and remained the same for Plan Year 2008. The state’s present contribution is estimated at $2.7 billion for group insurance premiums-an increase of $236.5 million in General Revenue Funds compared to the 2010-11 biennium.
  • ERS commissioned a Milliman study on the offering of an HSA to state employees. The state has long passed the recommended start date of September 1, 2009. Had the state begun offering the HSA as an option we would now be realizing the impact of the slower growth in costs that HSAs are proven to afford. Their growth rate is roughly half the rate of traditional insurance.
  • ERS has seen a unique problem in noncompliance with prescription medication among the clients of ERS. For instance, only 52% of clients with diabetes are compliant in taking their prescribed medications. This can cost the program the plan an additional $3,700 each year. An HSA would be well positioned to address this issue as clients have greater exposure to first dollar coverage such as prescription medications.
  • Many states make large contributions-almost $1,400 annually in Indiana’s case-to individual employee HSAs.
 
Recommendations
  • Readjust cost sharing for state employees, requiring them to pay a portion of the monthly premium.
  • Offer state employees the option of a high deductible health plan and health savings account to control costs.
  • Fully fund the employees who choose the high deductible health plan and health savings account leaving the difference between the amount per beneficiary on traditional health insurance and the HSA as the required employee contribution. This will incentivize enrollment in the HSA option.
  • Allow employees choice of a high deductible health plan with the minimum high deductible allowed under law or a plan with even higher deductible.

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