The board of trustees for the Employees Retirement System of Texas (ERS) has approved a new optional health plan for state employees, as directed by HB 966 by Crownover, enacted in 2015 by the 84th Legislature. The consumer-directed health plan combines high-deductible health insurance with health savings accounts to help pay for medical expenses.
Employees and retirees who are not eligible for Medicare will be able to enroll themselves and their dependents in the new plan during this summer’s open enrollment period. Coverage begins Sept. 1, 2016. A study conducted in 2008 for ERS estimated that 3 percent of employees would select a high-deductible plan if one were offered.
High-deductible health plan
The board last month approved a new, high-deductible health plan to be administered by UnitedHealthcare, which administers the current HealthSelect of Texas insurance program. HealthSelect and HMO plans now offered by the state have deductibles only for prescriptions and for out-of-network and out-of-area services.
Employees who enroll in the new option will have a deductible of $2,100 per individual and $4,200 per family for in-network health providers. Higher deductibles of $4,200 per individual and $8,400 per family will apply for enrollees who use out-of-network providers. Deductibles must be met before the plan will pay for most medical and prescription benefits, although preventive services such as annual well exams, screenings, and vaccines will be covered at no cost.
Once applicable deductibles are met, the plan will pay 80 percent for in-network services and 60 percent for out-of-network services until out-of-pocket maximums are met. The out-of-pocket maximum is $6,550 per individual and $13,100 per family within the network and $13,100 per individual and $26,200 per family outside of the network.
The new plan will offer the same network of doctors as the existing HealthSelect plan but, unlike the existing plan, will not require participants to obtain a referral from a primary care provider in order to visit a specialist.
The state will pay the full insurance premium for employees and half the premium for dependents, which is similar to existing state health insurance plans. The ERS-approved design for the high-deductible plan will reduce the dependent premium by 10 percent of the traditional plan premium. The ERS board is scheduled to approve in May the monthly premiums for the high-deductible health insurance plan and other health plans that will be offered beginning Sept. 1, 2016.
Health savings accounts
Participants in the high-deductible health plan will receive monthly deposits from the state into health savings accounts set up by a vendor selected by ERS. The state will make monthly deposits into these accounts of $45 per month for employee coverage or $90 per month for family coverage.
Participants may contribute to their health savings accounts an amount up to a maximum set each year by the Internal Revenue Service. The contribution limits for calendar year 2016 are $3,350 for single coverage and $6,750 for family coverage. The contributions are tax deductible, interest earned on the accounts is tax-free, and expenditures for qualified medical expenses are not taxed.
Employees who enroll in the consumer-directed health plan will not be eligible for the state’s flexible savings account program but will be able to use their health savings account funds for dental and vision care costs.
HB 966 requires ERS to study implementation of the consumer-directed health plan and report to the Legislature by January 1, 2020.
At a recent meeting, ERS trustees and staff discussed perceived benefits and drawbacks of the new plan. Some noted that the health savings accounts offer significant tax advantages and are portable when employees change jobs or leave state employment. Others expressed concerns about employees enrolling in the high-deductible plan because of slightly lower monthly premiums for dependent coverage without having sufficient funds for an unexpected medical issue and the resulting deductible and out-of-pocket maximum costs. ERS officials said they are planning an extensive communication campaign on the benefits and risks of selecting the consumer-directed health plan instead of the more traditional insurance plans.
by Janet Elliott