Understanding your health plan premium

Understanding your health plan premium

October 30, 2017

Whether in the public or private sector, what most people want from their employer is good, affordable health insurance. According to the Harvard Business Review, even salary comes second to the demand for high-value health insurance. More than half of those surveyed by Glassdoor said that benefits and perks were a major factor in deciding whether to take a job (February 15, 2017, para. 1, https://hbr.org/2017/02/the-most-desirable-employee-benefits). In a multi-year ERS survey, state employees also chose health insurance as their most valued benefit.

ERS offers competitive benefits at a reasonable cost

State of Texas employees and retirees have a choice of health plans offered through the Texas Employees Group Benefits Program (GBP). The State of Texas pays 100% of eligible full-time employees’ health care premiums. As an added bonus, most GBP health plans do not require their members to meet a deductible for in-network medical care before the plan begins to pay for care. (There is one high-deductible health plan.) Participants in other employers’ plans may pay up to or more than $1,000 every year in those up-front costs.

How do they decide what to charge us for health plan premiums, anyway?

HealthSelectSM of Texas is the GBP’s largest health plan and it is self-funded, as is Consumer Directed HealthSelectSM. This means that ERS collects premiums paid by the state and members enrolled in the plan and then pays health care claims directly, rather than going through an insurance company.

Setting HealthSelect’s premiums is typically a three-step process:
  1. Estimates – ERS’ financial experts estimate what it will cost to pay our members’ health care claims for the next two years and share that information with the Texas Legislature. (Like other state agencies and institutions, ERS submits a Legislative Appropriations Request a few months before the legislative session every other year.)
  2. Funding – The legislature considers ERS’ funding request along with those from other state agencies and institutions. After a thorough review, the legislature decides how much it will give to ERS to pay for health care over the next two years (which may or may not be what ERS requested). The ERS Board of Trustees then adopts a premium rate.
  3. Cost Savings – ERS can use its contingency fund — money banked through cost savings and favorable contract negotiations with third-party administrators — to offset lower-than-requested funding from the legislature and help keep premiums as low as possible. 
Once ERS has arrived at its premium rates for its HealthSelect plans, the Health Maintenance Organizations (HMOs) , which pay claims through other insurance providers, can set their premium rates. Those rates can be lower, but not higher, than the rates set for the HealthSelect plans.

Cost-saving measures that add up

It’s estimated that without ERS’ cost-management efforts, premium costs for GBP health plans would be more than triple what they are now. ERS also works to keep administrative costs low. ERS spends only three cents of every dollar to administer HealthSelect of Texas — 97 cents of every dollar in that plan goes directly to health care costs. Compare that to large, private health plans nationwide, whose administrative costs are estimated at 10.5 cents of every dollar.

Cost management by both ERS and our members allows the State of Texas to offer competitive benefits to employees and retirees at a reasonable cost.

How you can help keep your premiums from skyrocketing

Reducing costs is always important and can help keep premiums from skyrocketing. For example, it might seem like a pain to get referrals to specialists and to wait for prior authorizations for certain procedures or prescriptions. But those rules really help us keep health costs in check, while still making sure participants get the care they need.

You can also help keep costs down by:
  • seeking care from in-network providers
  • working with your doctors and pharmacists to choose an appropriate generic or lower-cost medication,
  • learning about imaging options and requesting less expensive procedures, when appropriate, and
  • enrolling in appropriate disease management programs.  
You can also keep costs down by maintaining good health. That’s why all GBP health plans offer wellness programs, helping members make healthier lifestyle choices.

Managing health costs isn’t always easy, but the payoff is possibly preventing future benefit cuts and the peace of mind that comes with having good health insurance when you need it.

Learn more about how the State of Texas and health plan members share costs by watching this short video