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Friday, December 08, 2006

Illinois, The Next New Jersey

Illinois, fresh on it's revelation of a $1.6 billion budget deficit, and a massive funding shortfall for pensions and other obligations has come up with a new way to spend $5 billion, PER YEAR, that it doesn't have.

The state has decided it's not fair that some of you have insurance, and some don't. So, they've decided, that for a measly $5 billion a year they can take care of the problem of 1.5 million uninsured residents.

The number will actually grow with their plan, as will the cost. You see, the plan is that if you provide jobs, you'll be forced to provide (a yet undisclosed amount) money either for coverage of your employees, or fines to the state to pay for insurance for others.

If you have private insurance, you'll get hit with a fee on it to help cover those who don't.

If you are an insurer, you'll be forced to write policies for everyone, and not be able to raise premiums, or cancel policies without the nod from a new state agency.

My advice for folks living in Illinois, buy property in Indiana, it's going to be a gold rush as businesses move out of Illinois to the tax friendlier confines of our neighbor. My other advice is if you have private insurance right now, see about paying ahead on your premiums for the next decade or so, because that company will probably stop writing new policies in Illinois shortly before a law of this type goes into effect.

If you think it's all scare hype, look to New Jersey's "Joint Underwriter Association" (JUA)problems of the 1980's, when half the auto insurance companies in the US refused to write policies in The Garden State. It's gotten slightly better since, then, but not much, and because of lack of choice, and mangled management by the state, all the laws designed to lower rates have NJ at the top of the rate ladder in the US.

I lived through the JUA for a time. When I bought a new pickup truck my insurance rates were higher than my truck payment, there is something fundamentally wrong with that idea. Especially when the reason the rates were so high was the government was lowering them for me!!!!??!?!?!?!

Health insurance companies are going to be no more likely than auto insurers; maybe less so; to enjoy the idea of having the state force them to write low cost policies to high risk people. In fact, the insurance game is built on the opposite strategy. Instead, what will happen is the state is going to end up letting fly by night companies write polices, at high prices, when every decent company flees the state.

One of the intersting things about the proposal is the caps, and where some of the coverage will come from. If you make up to 400% of the federal poverty level ($80,000/yr) for a family of four, you'll be eligible for subsidized insurance premiums. If you are single and under the poverty level ($9,800) Medicaid will give you full coverage, according to the plan.

Two problems there, the first, insurance purchasing becomes a disincentive to those who can afford it, when they can go to the state instead. And, Medicaid is perpetually underfunded by both the State and Federal entities that oversee it. Where is the extra cash for a couple hundred thousand more recipients going to come from?

The answer is of course, the business penalty. The state will come up with a number high enough to cause even businesses who provide decent coverage to be fined for not paying enough. Illinois can't just raise the business tax to come up with the cash, they are at the Constitutionally mandated cap on that already, so a new "fee" is coming. One that will have businesses going.

If this passes; and I urge everyone to contact there Representative or Senator in Springfield and urge them to just say no; we will see and exodus of business from the state on a scale that is hard to imagine. Let's face it when the government comes up with a plan that includes user fees, business fees, and a whole new department, it's going to be ugly.

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Blogger Lone Pony said...

VERY good points as usual CP. I wish more people understood the dynamics of things like you do. It reminds me of something I read once (don't remember where): If you think health care is expensive now...wait till it's free!

7:39 AM  
Blogger Crazy Politico said...

Wait until the government makes anything free to see it become expensive :)

1:59 PM  

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