New TAHP Guide Breaks Down Coverage, Spending, & Where to Focus to Tackle Affordability

By: TAHP | Thursday, May 7, 2026

Part of TAHP's Affordability Series: What's Driving Up the Cost of Coverage

What's new: TAHP released a new guide this week breaking down who covers 25 million Texans, how the system is structured, and where every premium dollar actually goes. Most Texans are covered through work, and most of every premium dollar pays for medical care.

Why it matters: Health coverage is what stands between a family and a $30,000 hospital bill. Most Texans have it through work and never think much about how it functions. When premiums climb year after year, families and employers feel it directly in paychecks, benefits, and budgets.

How Texans get covered:

• Employer coverage leads: 46% of Texans get coverage through work, the largest source in the state.
• The individual market has grown fast: 4 million Texans now buy their own coverage, four times the number enrolled in 2020.
• Texas still has a gap: 5 million Texans are uninsured. The most common reason is that they lack job-based coverage.
• Two kinds of employer plans: With a fully insured plan, the insurer takes on the financial risk and pays the claims. With a self-insured plan, the employer pays claims directly and hires a health plan to administer benefits. Because the employer takes the risk, federal law governs the plan instead of the state.
• Most employer coverage falls under federal law: Fully insured plans cover 6.8 million Texans and fall under Texas Department of Insurance oversight. Self-insured plans cover 12.2 million. Four out of five Texans in employer coverage are in a self-insured plan.
• Government programs cover about a quarter: Medicaid covers 4 million Texans and Medicare covers 3.6 million.

Where the premium dollar goes: Premiums are not arbitrary. Actuaries project what medical care will cost next year, regulators review those estimates before they reach Texans, and federal law requires that most of every dollar go toward actual medical care.

• Hospitals and drugs take 65 cents: Inpatient, outpatient, and emergency hospital care account for about 40 cents. Prescription drugs take about 24 cents.
• Doctors and other care take about 19 cents: This covers physician visits and other outpatient services.
• Administration, taxes, and profit take about 16 cents: That includes business expenses, cost containment work, and taxes and fees. Profit only 2.4 cents of every dollar.
• 2026 premium increases: Nearly 90% of the increase ties back to rising prices for hospitals, drugs, and provider services.

Why the same coverage can cost very different amounts: Every plan has the same tradeoff: pay more each month, or pay more when you use care. The right balance is different for every family and every employer.

• How the math works: A plan with a $3,000 deductible costs less each month than one with a $500 deductible. You save up front and pay more when you actually use care.
• Different needs, different plans: A younger, healthier worker often picks a lower-premium plan. A family with chronic conditions usually picks one with richer benefits and a smaller deductible.
• Employers face the same choice: A small business with younger workers might pick a lower-premium plan to keep monthly costs down. A larger employer with an older workforce might pick a more comprehensive plan that costs more each month.
• The type of plan changes the rules: Fully insured plans must follow every Texas state mandate. Self-insured ERISA plans do not, which gives large employers more flexibility to design benefits, but also means state consumer protections do not always apply.

What Texas can do to bring costs down:

• Expand affordable coverage options: Employers should be able to purchase more flexible, lower-cost health plans that cover essential needs without state mandates that drive up premiums.
• Stop new mandates: Texas should put a moratorium on new mandates, use the state's fiscal note to show the true cost of any mandate under consideration, and never pass one that the state won't apply to its own ERS, TRS, and Medicaid programs.
• Protect self-funded employers: Large employers choose ERISA plans because they are more affordable and flexible. Texas should oppose efforts to layer costly mandates onto that coverage.
• Root out fraud: Texas estimates 10% of health care spending is lost to fraud, waste, and abuse. Extending the same protections used in Medicaid to private coverage would recover real money for employers and families.

The bottom line: Texas has a large and complex coverage market. Most Texans are covered at work, most of every premium dollar pays for medical care, and the biggest driver of rising premiums is the price of that care. Understanding how the coverage works is the first step to addressing affordability.