Government

Illinois reform plan hits funding snags

The governor's proposal would extend health coverage to nearly all uninsured adults in the state, but the tax to pay for it has attracted strong opposition.

By Doug Trapp — Posted May 28, 2007

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The future of one of the most ambitious state health reform plans offered this year is unclear because of disagreement over financing.

Illinois Gov. Rod Blagojevich's initiative, Illinois Covered, would create a three-level health insurance program. It would consist of a state-defined but privately run pool of health plans for workers without insurance access, a program to subsidize employer-sponsored health insurance bought by employees, and subsidized insurance for people earning less than the federal poverty level.

The proposal would provide access to affordable insurance for the state's 1.4 million uninsured, according to the governor's office.

However, the $3.1 billion proposal needs $2 billion in state general revenues. Blagojevich proposed this funding come from his $7 billion gross receipts tax plan, which he unveiled in March. It would levy a 1% tax on goods, retail and manufacturing and a 2% tax on services. Businesses with less than $2 million in revenues and nonprofits would be exempt.

Two Senate committees approved the tax bill, but the business community railed against it, labeling it the state's biggest tax increase ever. The Illinois State Medical Society is concerned about the proposal's potential effect on physician practices, said President Rodney C. Osborn, MD. It wasn't immediately clear how many practices would pay the tax, he said, but many physicians expressed concern at a recent ISMS meeting.

Opposition reached a new high May 10 when the Illinois House rejected the tax with a 107-0 nonbinding vote -- one day after Blagojevich made a special plea for passage before lawmakers. This left the governor's staff talking about compromises.

"We continue to have discussions about possible adjustments that can be made [to the tax] and collaborate on a new funding stream for the state," said Justin DeJong, Blagojevich's budget spokesman.

ISMS says program needs work

The ISMS has worries about the health reform plan beyond its proposed funding source, Dr. Osborn said. The organization disapproves of a provision that would mandate that physicians who accept private insurance must also accept patients from that company's Illinois Covered plan. Doctors should be able to choose to participate if the plan fits their patient base and practice.

The purpose of that provision, said Michael McRaith, director of the Illinois Division of Insurance, is to make sure health care is not just affordable and meaningful, but accessible. "So in other words doctors can't cherry-pick which patients they want to see based on the reimbursement rates," he said.

McRaith said doctors would benefit from Illinois Covered's reimbursements and the expanded pool of insured patients. The program would pay hospitals 5% to 12% above Medicare rates. Physician reimbursement hasn't been specified, but McRaith expects doctors would receive rates similarly above Medicare payment. The ISMS, however, wants reimbursements to reflect the rates the insurers participating in Illinois Covered pay for private patients.

Meanwhile, the Illinois Academy of Family Physicians, the Illinois Hospital Assn. and the Illinois Chapter of the American Academy of Pediatrics have endorsed the Illinois Covered initiative. Illinois Academy of Family Physicians President Kathleen J. Miller, MD, said in an April 17 statement to members that the academy's board believes everyone needs to step up to improve health care in Illinois. "That means employers, government, payers, providers and patients themselves," Dr. Miller wrote.

Illinois Covered was influenced by the Adequate Health Care Task Force, created by legislation in 2004 to issue recommendations for universal health care in the state. The task force's report, finished in January, called for an insurance pool and a purchasing mandate, but the mandate didn't make it into the health reform bill.

Other provisions in the legislation would bring mental health parity to employees at small businesses and require all Illinois employers to offer section 125 "cafeteria" health plans, which allow employees to pay for health benefits with pretax dollars and to choose cash in lieu of benefits.

Payroll taxes eyed

In addition to the $2 billion in gross receipts tax, Blagojevich's proposal would finance Illinois Covered with $1.1 billion in payroll taxes. Businesses with 10 or more employees that don't spend at least 2.5% of payroll on health care would be subject to a payroll tax of up to 3%. Nationally, businesses spend between 8% and 10% on employee health care, McRaith said.

If the gross receipts tax dies in the General Assembly, the other $2 billion could come from general state revenues, DeJong said. But the state is also trying to solve a $40.5 billion unfunded pension mandate and to inject $10 billion into the school system in the next four years. The governor also promised to boost funding for the state's Medicaid program.

Dr. Osborn said the ISMS was waiting for Medicaid payment details. "We haven't seen, other than promises, what that program will be," he said.

Leasing the state lottery could generate $10 billion to $12 billion, according to a Blagojevich release. The governor has so far resisted increasing property, sales or income taxes.

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ADDITIONAL INFORMATION

Covering Illinois

Illinois Gov. Rod Blagojevich is attempting to expand access to health insurance with a proposal called Illinois Covered. It includes:

  • Illinois Covered Choice, a pool of state-defined, privately run health plans for those without access to employer-sponsored health insurance. Both employers and individuals could buy coverage. Employee premiums would be based on sliding scales.
  • Illinois Covered Rebate, which would provide financial assistance for those buying insurance through their employers. The state would cover all premiums for those earning less than the poverty level. Workers earning between 100% and 400% of poverty would pay between 1.5% and 5% of their income for a plan. Employees earning more than 400% of poverty would not qualify for help.
  • Illinois Covered Assist, an insurance plan with low co-pays for childless adults earning less than the poverty level.

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