Ill. governor outlines proposed health reforms

SPRINGFIELD, Ill.--Illinois Gov. Rod Blagojevich's sweeping health reform proposal to cover the state's more than 1.4 million uninsured would be funded with a new gross receipts tax that would replace the state's corporate income tax, along with a new payroll tax on employers that do not provide health insurance.

The gross receipts tax would be assessed on businesses in the state that generate $1 million or more in annual revenues, while the 3% payroll tax would be placed on employers with 10 or more employees that either do not provide health insurance or that spend less than 4% of their payroll on employee health care costs.

Addressing another pressing benefits-related issue, Gov. Blagojevich proposed selling bonds and leasing out the state lottery operations and use the proceeds of the transaction to shore up the state's underfunded pension plan for state employees and teachers. The new bonds and lottery-leasing revenues would collectively infuse $26 billion into the flagging retirement system, increasing funding ratios to 83% of pension obligations from the current 60.5%.

"Of all the forms of inequality, it is the injustice in health care that is the most shocking and inhumane," Gov. Blagojevich said during today's State of the State address to the Illinois General Assembly, drawing from a speech given by the late civil rights leader Martin Luther King Jr.

Citing numerous examples of the struggles faced by Illinois residents who either lack health insurance or who are afraid of losing their employer-provided coverage, the governor said: "Everyone should have access to affordable, quality health care."

Under Gov. Blagojevich's proposed program, dubbed "Illinois Covered," the state would enter into public-private partnerships with insurers to provide a lower-cost, guaranteed-issue insurance policy to individuals who do not have employment, who work for small businesses or who work for employers that do not provide health insurance coverage.

The state would ensure that the cost of these products is affordable by reinsuring insurers against certain medical losses and by providing premium assistance to reduce the price of the product for individuals who make up to 400% of the federal poverty level, or $80,000 for a family of four.

If passed by the Legislature, the Illinois Covered program would be implemented over a period of three years beginning Jan. 1, 2008.

The governor did not address whether the state would seek a waiver from the Employee Retirement Income Security Act, which prevented another, similar, play-or-pay initiative from being implemented. Earlier this year, the 4th U.S. Circuit Court of Appeals ruled that Maryland's law, which required employers to provide health benefits that cost the equivalent of 8% of payroll or pay an equivalent tax to the state to provide them, was pre-empted by ERISA (BI, Jan. 22).