Last week, Gov. Greg Abbott, Lt. Gov. Dan Patrick and Speaker Dustin Burrows issued joint instructions to state agencies preparing Legislative Appropriations Requests for the 2028–29 biennium. The directive was clear: as the starting point for budget deliberations, each agency must reduce its base appropriation request by 3%.
For most agencies, meeting that target will mean weighing difficult tradeoffs among programs and services. The Employees Retirement System of Texas (ERS) is in a somewhat different position. That’s not because it is exempt, but because the letter itself points to a specific tool available to it.
ERS administers the Texas Employees Group Benefits Program (GBP), which provides health coverage to state employees, retirees and their dependents. According to ERS, the GBP covers more than half a million participants, making it one of the largest healthcare purchasers in the state.
The leadership letter’s exemptions section speaks to employee group benefits directly. After addressing maintenance funding for pension and benefit costs, it adds a notable line: “Group benefit modifications may be considered.” In other words, while many agencies will search their program budgets for savings, state leadership has explicitly identified benefit-plan design as an area open for review.
Effects Reach Beyond Budget
Rising healthcare prices are straining budgets well beyond the state’s own. Employers of every size that provide coverage — city and county governments, school districts that run their own health plans, and the commercial market alike — feel the same pricing pressures. National benchmarks capture the scale: according to KFF, average annual premiums for employer-sponsored family coverage reached nearly $27,000 in 2025. Milliman estimates the total spending of care for a typical family of four, including what workers pay out-of-pocket, will approach $38,000 in 2026.
The response tends to be the same in each case: absorb the higher prices, add funding, or shift more of the burden onto employees, and then repeat the exercise the next time prices rise. What rarely gets addressed directly is the price of care itself. Addressing prices is different in kind from those responses. It lowers what the state pays without moving the bill onto employees. And because members share in premiums and out-of-pocket spending, it can improve affordability for them at the same time.
Those prices are high in large part because Texas hospital markets are heavily consolidated: nine Texas metro areas are served by just one or two hospital systems. That strengthens providers’ hand in setting prices, reduces competition and leaves individual purchasers little leverage to push back. This is where ERS’ scale becomes relevant. Because it buys care for so many people, changes to how the plan pays for that care can move real dollars. A purchaser that large tends to have more leverage than most to negotiate the prices it pays and to steer members toward higher-value care.
A wide reaching benefit
The benefit reaches past ERS and the state budget. If the state’s own plan can lower what it pays for care, it offers a working model to the counties, school districts and employers facing the same pressures. It can serve as an example they can study and adapt rather than each confronting the price of care alone. That would turn a budget exercise into a broader contribution to healthcare affordability across Texas.
The guidance is, at its core, about affordability. State leadership laid out an option that lets ERS respond to the budget guidance by focusing directly on what the state pays for healthcare services. Taken up at ERS’ scale, it would help advance a more affordable healthcare system for Texas families, employers, taxpayers and the state alike.
