NCPA - National Center for Policy Analysis

Texas Health Insurance Reforms

March 25, 2013

Texas Governor Rick Perry has decided that Texas will not expand its Medicaid program to 138 percent of the federal poverty line or set up a health insurance exchange in accordance with the Affordable Care Act ("ObamaCare"). For Texas, the move is a strong signal that the state will refuse to enact federal policies that it disagrees with. However, just because Texas refuses to implement ObamaCare's initiatives does not mean that the state cannot benefit from health policy reforms, says John Davidson, a health care policy analyst in the Center for Health Care Policy at the Texas Public Policy Foundation.

  • Employer-sponsored health insurance became popular during World War II when price controls and wage freezes kept the personal financial growth of individuals stagnant.
  • In the decades following, employer-sponsored health insurances plans became subject to collective bargaining and exempt from income taxation.
  • While regulation of health insurance was initially a state domain, passage of Medicare and Medicaid in 1965, the Employment Retirement Income Security Act in 1974, and the Health Insurance Portability and Accountability Act in 1996 brought increasing federal regulation of the insurance industry.

Today, most employer-funded health insurance plans adopt the health maintenance organization model that has the employer pay most of or the entire premium, while employees pay a copay or deductible and a third party administrator pays the provider.

  • Employment-sponsored health insurance plans cover about 150 million people in the United States and an estimated 11.5 million people in Texas.
  • In Texas, consumer driven health plans (CDHP), like Health Savings Accounts (HSA) and Health Reimbursement Accounts, have been growing in popularity because they enable employers to transform health insurance from a set of defined benefits to a set of defined contributions.
  • CDHPs encourage beneficiaries to take a more active and conscientious role in their health care, and annual premiums for families with HSA accounts are less than traditional HMO plans.

Allowing Texas' state employees to set up CDHPs would save the state substantial sums of money, as costs and insurance outlays are expected to increase.

  • Texas lawmakers should also reconsider mandates on which benefits insurance companies offer, which in 2009 numbered more than 3.5 million claims and $462 million.
  • Additionally, lawmakers should reconsider the definition of a small employer group.

Source: John Davidson, "Three Proactive Health Insurance Reforms for Texas," Texas Public Policy Foundation, March 2013.


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