Wednesday, January 31, 2007

Health plans are in the air in... Pennsylvania

Gov. Rendell (D) has also proposed a new plan early in January to expand health insurance. Part of the plan is the fair share for healthcare model used to target Walmart retooled for small business:
The plan would also make it mandatory for small businesses -- those with fewer than 50 employees -- to provide health care or pay a fair-share assessment of 3 percent. It would be phased in over several years, with the smallest of employers, those with fewer than 10 employees, having to commit last.
Next, he proposes a cap on administrative cost (or floor on premiums going to healthcare):
Rendell proposes that rates for health care be set by an insurance commissioner, with 85 percent of the premium money dedicated to medical care. The remainder could be used for advertising and overhead.
The bulk of the program would be called "Cover All Pennsylvanians" (CAP) and, according to his press release:
Businesses may participate in CAP if they have not offered health care for their employees in the past six months, if they have fewer than 50 employees and if, on average, those employees earn less than the state average annual wage (approximately $39,000). Businesses that choose to join the program will pay approximately $130-per-employee/month and their employees will pay on a sliding scale, ranging from $10 to $70, depending on income.
Governor Rendell said all uninsured Pennsylvanians – no matter the size of their employer – will be able to purchase affordable health insurance through CAP. Every uninsured adult who earns more than 300 percent of the federal poverty level can participate in CAP by paying the full cost of the premium, which will be approximately $280 per month.
Uninsured adults who earn less than 300 percent of the federal poverty level and employees of small businesses whose average wages are lower than the Pennsylvania average will get help paying CAP premiums through discounts and subsidies. For example, a family of four who earns up to $60,000 a year will be eligible for assistance.
The individual mandate will focus only on individual earning more than that level and on employers (who have to "pay or play"), but presumably those beneath that threshold will still have the option not to buy a CAP plan, meaning Rendell's plan will still have more adverse selection costs than medicare for all. Still, the state subsidies will make CAP attractive for even those with relatively low expected costs, so this looks like quite an improvement. It expands coverage without adding too much to the private health insurance system with its high administrative costs.

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