HB1569: Opt-in Health Savings Account Plans for State Employees
HB1569 would modify the State Employees Group Insurance Act of 1971 to create an optional alternative health insurance program for state employees, a combination of a Health Savings Account and a qualifying, state-sponsored, High-Deductible Health Plan.
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The Problem in Illinois
In the next 10 to 12 years, the annual cost of state employee health benefits could triple from the current $1.6 billion. This will require cuts in benefits or cuts to core government services, unless a way can be found to lower the costs of employee health plans while maintaining quality in coverage.
A Solution
Health savings accounts are tax-deductible bank accounts that account holders can access to pay for routine healthcare costs. These funds must be paired with high deductible health plans. Policyholders and their employers can contribute to the accounts, and those funds are then used to cover any medical bills below insurance deductibles. Any HSA funds unspent by year-end can remain in the account and become tax-free retirement savings.
As outlined in the Illinois Policy Institute brief entitled ?Health Savings Accounts: A Win-Win for Illinois Public Employees and Taxpayers,? creating an HSA-compatible health insurance option would benefit both the state employees and the state government. This legislation would give state employees the option of selecting health insurance plans with lower premiums and potentially higher take-home pay, while maintaining access to quality care. This also could produce significant savings for the state over the next decade by reducing employee health insurance costs.
HB1569 stipulates that the average per person employer cost (including contributions to the HSA and HDHPs) must be less than the average per person employer cost of the self-insured state employee health benefits program for the same fiscal year. This provision will help the state realize savings from the voluntary HSA health plan, which can be used towards reducing the state deficit and sustaining core government services. The legislation requires the Director of Central Management Services to submit potential program designs to the Commission on Government Forecasting and Accountability, or COGFA, for review by December 31, 2011. After COGFA reviews the designs to ensure they meet the average per person employer cost provision in the legislation, the HSA-compatible health insurance option would become available to employees by July 1, 2012.
Why This Works
Similar Health Savings Account options for state employees have been successfully implemented in other states. In 2006, Indiana?s state government began offering employees an optional HSA-compatible insurance plan. By 2010, more than 70 percent of Indiana?s 30,000 state workers utilized the HSA; only 3 percent of HSA-enrolled workers switched back to the standard health insurance plan after enrolling in the HSA program. In 2010, state workers enrolled in the HSA option helped Indiana save more than $20 million.
Providing state employees with the option of health savings accounts and high-deductible health plans is a win-win situation for taxpayers and state workers. As the state is facing significant budget pressures, innovative solutions such as HB1569 help save money while maintaining quality healthcare for our public employees.
Additional reading: Jim Porterfield and Kristina Rasmussen, ?Health Savings Accounts: A Win-Win for Illinois Public Employees and Taxpayers,? Illinois Policy Institute, September 29, 2010, www.IllinoisPolicy.org/HSA.