Monday, June 12, 2006

Insure Montana

Margit Arthun was leery when she first heard about the state's new insurance program. If something sounds too good to be true, it usually is, she said.

Addendum: If it originates with government there is a tax increase in the works somewhere.

Arthun, who manages Stillwater Mercantile's lumberyard in Columbus, is one of 3,300 Montanans benefiting from Insure Montana, an insurance program funded by a $1-a-pack cigarette tax. Authorized by the 2005 Legislature, the program offers two ways for small-business employers and employees to save: tax credits for businesses that already offer insurance and a purchasing pool, plus state assistance payments, for businesses that couldn't afford insurance before.

According to census figures, there are about 900,000 folks in that state. If only 5% smoke, and average a pack a day, that is $1,350,000 in monthly revenue to subsidize health insurance coverage.

Once the paperwork came through, Arthun learned that she would pay $179 a month for comparable coverage with a $2,000 deductible. But there's a bonus: the state assistance program reimburses her for more than two-thirds of her $179 premium.

The purchasing pool is set up so that premiums are deducted from an employee's paycheck. But each employee also receives an "assistance payment," from the state, which varies from 20 to 90 percent of the premium, depending on the family's annual income. The average reimbursement runs $107 per month.

On the surface, that’s a good deal.

Pat Moore also works at Stillwater Mercantile. Until he signed up with Insure Montana, he was one of the 170,000 Montanans lacking health insurance.

That’s 19% of the states population . . . a bit higher than average.

Of course, apply the 40-40-20 rule and the numbers become clear. About 40% of the population will earn in excess of $50,000 per year. These folks COULD afford health insurance, but opt not to do so. Surprisingly, many of those will still qualify for Insure Montana.

Another 40% have an income that is low enough to qualify them for existing taxpayer funded programs such as Medicaid, but for some reason are not participating.

That leaves the remaining 20% of the uninsured (around 180,000) who earn too much to qualify for existing assisted programs (or earn enough to pay for their own coverage without assistance).

The Legislature allocated $3 million for the pilot year and an additional $10 million for the second year. After that, it's up to the next Legislature.

Either there are fewer smokers in Montana than I guesstimated (at 5%) or the money is disappearing somewhere else.

At $1 per pack and 5% smokers at a pack a day, that should generate over $16,000,000 per year.

Personally, I like the idea, however like many government plans I will reserve judgment.

It still is (from all appearances) a guaranteed issue plan with little or no underwriting, richer benefits than are available in the market place and is offered at a lower price (before the subsidy). My gut tells me the plan is over-promising and will eventually under-deliver.

I also have a problem with subsidizing premiums for someone who earns as much as $75,000 per year.

We will continue to watch and see what happens. The plan is about a year old so it will take another 12 – 18 months for them to actually get a handle on results.

Stay tuned . . .
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