The Employee Retirement System of Texas’ (ERS) pension benefits are in a better position than its health benefits, and the system as a whole is better off than a number of other states. However, “better” is still not good. In total, ERS is short by an estimated $591 million. The recent Pew report on State and Local pensions showed that in 2008 only 2.5 percent of the $28.6 billion in health care and other retirement obligations in ERS were funded. This is a troubling position for the state’s pension fund to be in. Today, the Texas House of Representatives took a much needed step towards putting ERS on stable footing.

House Bill 1766 by Rep. Myra Crownover requires ERS to offer state employees a Health Savings Account (HSA) option. This is a simple proposal, but one that has seen significant success in the State of Indiana. In 2005 Gov. Mitch Daniels issued an executive order requiring the Indiana pension system to offer an HSA option to its employees. Only 4 percent of Indiana’s employees selected it during the first year, but by 2010, more than 70 percent had selected it voluntarily. In the same year the employees had accumulated a total of $30 million in their savings accounts and saved Indiana more than $20 million. They also saved more than $8 million over their counterparts in traditional PPO plans.

HSAs have proven to bend the cost curve down in health care time and time again. By allowing the individual to accumulate wealth and control spending, the accounts return power over health care to the person instead of the insurance industry or government. The passage of HB 1766 by the Texas House of Representatives is a positive step towards making ERS sustainable while empowering our employees.

– Spencer Harris