Texas Legislature May Expand Government Insurance Role

Published June 1, 2009

The Texas State Senate is considering a bill to subsidize health care costs for small businesses employing low-income workers.

Senate Bill 6, the Healthy Texas Act, would create a government-administered Small Employer Premium Stabilization Fund to provide taxpayer-funded reimbursement to small businesses for employees’ health insurance claims.

Employers would be required to pay the first $5,000 of employee health claims but would be eligible to seek state reimbursement for up to 80 percent of claims from $5,000 to $75,000.

For a business to qualify, at least 30 percent of its employees would have to have income at or below 300 percent of the federal poverty level. In addition, 60 percent of the business’s employees would have to be participating in the firm’s small group insurance plan.

As the measure is aimed at encouraging more small businesses to offer group health insurance to their employees, only businesses that did not offer group health insurance in 2008 would qualify for the program.

More Government Control

While the proposal might help trim some small businesses’ health care costs and increase the number of employees receiving insurance, ceding more health care decisions to state bureaucrats is too high a price to pay, warned Greg Scandlen, director of Consumers for Health Care Choices at The Heartland Institute.

“This proposal would put the state in charge of all health care, by defining what services and fees qualify for the subsidy. And the cost of having the state pay for 80 percent of all claims over $5,000 would be enormous,” Scandlen said.

“This is similar to other proposed reinsurance schemes intended to make employer coverage affordable by removing some of the risk of catastrophic costs,” said Devon Herrick, Ph.D., a health care economist and senior fellow at the National Center for Policy Analysis in Dallas. “If this becomes law, it will be interesting to see how successful it is at encouraging small businesses that employ moderate-income workers to provide coverage to their employees.”

Government Regulation the Problem

Only one-third of Texas small businesses currently offer employee insurance plans, while 89 percent of corporations do, according to the Texas Medical Association. Some 25.2 percent of Texans, and 20.2 percent of children, are uninsured, constituting nearly 11 percent of the entire nation’s uninsured population.

The solution to uninsurance, says Scandlen, is to encourage more individual responsibility and control of health care.

“Texas would be far better off if it subsidized workers instead of employers and insurance companies, and reduced the regulations that make insurance difficult to get,” Scandlen said. “For instance, Texas currently prohibits employers from helping to pay for a worker’s individual health coverage, even though the IRS allows employers to do so through the use of Health Reimbursement Arrangements.

“The state should lift this restriction. It should also relax regulations mandating that certain benefits be included on small businesses’ employee health plans,” Scandlen concluded.

Krystle Russin ([email protected]) writes from Texas. Joe Emanuel ([email protected]) writes from Georgia.

For more information …

Senate Bill 6, the Healthy Texas Act: http://www.legis.state.tx.us/tlodocs/79R/billtext/pdf/SB00006F.pdf