As Texas lawmakers tackle health care affordability, two of the state's largest buyers of healthcare provided insight into what might be driving higher costs.
Representatives from the Teacher Retirement System of Texas and the Employee Retirement System of Texas testified Friday in front of the House Select Committee on Health Care Affordability. The second day of the two-day public hearing focused on how insurance and insurance companies potentially contribute to rising health care costs.
Rep. James Frank, the committee's chair, said he was interested in hearing from the Teachers Retirement System of Texas, or TRS, and the Employee Retirement System of Texas, or ERS, to have a look at data from the actual buyers of health care – with the goal of understanding what's driving up costs.
"We've heard about the different industries, but you guys are very large buyers of healthcare in the state of Texas and on behalf very important people," he said. "Y'all have not been exempt from the increases in health care."
Texas House Speaker Dustin Burrows called for the creation of the House Select Committee on Health Care Affordability earlier this year, tasking state representatives with examining factors that affect healthcare affordability in Texas.
Frank said the committee will likely meet again during the summer, and a few more times later in the year. The committee is expected to provide a final report on any policy recommendations it may have ahead of the 2027 legislative session.
What Texas' largest health care buyers are seeing
TRS provides health care coverage to both active and retired teachers across the state.
Katrina Daniel, the chief health care officer for TRS, said there are about 1,000 school districts in the organization's plan.
While the plan is facilitated by a larger insurance company, Daniel said TRS sets the healthcare premium amounts by region. She said health care costs can vary "dramatically" from region to region.
"Consistently, South Texas and West Texas are some of our lower-cost areas for premiums and fairly consistently get lower premium increases," Daniel said.
Daniel linked that directly to lower costs for health care services.
Frank said teachers in higher cost areas – like the Dallas Fort-Worth Area and Austin – are bearing the weight of those costs.
"If you're in an expensive region, your teachers are getting charged more for their insurance, period," Frank said.
Frank, who represents House District 69 – a higher-cost area that includes Wichita Falls and Paducah — said the regional system is a requirement in state law.
ERS provides health care coverage to both active and retired state employees, as well as certain public sector higher education employees.
Blaise Duran, director of group benefits division at ERS and a health care actuary, said his organization has seen costs increase, in line with other organizations in the industry.
"Inflation – that's the main cost driver of our healthcare cost increase," he said. "We are expecting, you know, in the neighborhood a little bit higher than [the historical rate] …for the next few years because currently trends running a bit higher."
Between 2017 and 2025, Duran said the organization didn't have to ask the legislature for a cost increase because of some contract changes that decreased prices — but health care costs were still rising each year, even if individuals and the state wasn't seeing it.
Discussions on consolidation and competition continue
Competition was one of the key theme from the first half of the hearing held Thursday.
About 40% TRS health plan enrollees billed preventive visits under "large groups," according to Daniel. Those consist of "highlight consolidated providers," often housed within a hospital system.
"We know, whoever your boss is, is going to drive some of your decision making," Daniel said. "You probably have financial incentives built in to support the structure that you report up to."
Because TRS uses a regional model, Frank said it can offer lawmakers insight into what's behind high healthcare costs.
"You can see…where things are really expensive and where competition lacks," he said. "And you can also be aware that your teachers are benefiting from it or getting penalized for it."
However, Daniel said a higher number of providers in an area doesn't always mean lower prices, which points to systemic issues.
"There's a proliferation of providers and facilities in Dallas, but why isn't it getting less expensive?" she said. "Both the price and the demand is higher in the Dallas-Fort Worth area."
Frank said it might be worth examining where there's a lack of "players" rather than facilities — noting that one player could own 30 facilities, still contributing to consolidation in health care.
Incentives and Insurance
Lawmakers also heard from several insurance experts who highlighted how insurance can affect affordability.
Wendel Potter, president of the Center for Health and Democracy, worked as the head of communications for two of the largest insurers in the U.S., Cigna and Humana, for 20 years before becoming an advocate for healthcare reform. He said over the past 25 years, premiums have more than tripled while coverage has gotten "steadily worse."
"The company that makes its products least useful within the limits of what regulators and employers will tolerate wins," he said. "A narrower network is cheaper to operate. A denied claim is pure margin. Prior authorization that discourages the patient from getting medically necessary care boosts the insurance company's bottom line."
Until the factors that incentivize companies change, Potter said they'll continue to behave the same way.
He also said the impact is less access and patient choice, which can have wide-reaching effects in the long run – like rural hospital closures and higher uninsurance rates.
Susan Pantely, with the American Academy of Actuaries, said costs in the insurance system are more "manageable and predictable" when insurance markets are stable and have participation from all parties, which she said comes from competition in the market.
But, she said the driving force behind higher premiums is the higher costs for services.
"Premium rates reflect health insurance costs — they don't drive them," Pantely said. "They're developed with forward-looking estimates of expected healthcare costs in the future and also account for any state and federal rules."
Several experts, including Pantely, cautioned that health care affordability is a complex issue with a lot of players involved — but focusing on the people most impacted is a key part of the conversation.
"Meeting health care consumers where they are, rather than falling back on the complex language of the healthcare system, is an important challenge affecting affordability and access," Pantely said.
Abigail Ruhman is KERA's health reporter. Got a tip? Email Abigail at aruhman@kera.org.
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