The cost of a government health insurance plan could be based on the average health care cost for people in each age group plus a certain percentage. For example, the government insurance for a person born in 1960 could be the average health care cost (not insurance cost) of everyone born in 1960 above a deductible amount, plus a percentage, maybe somewhere around 5 to 15 percent.
Private insurance companies could pick their customers, but they could not cancel their customers, their rates would have to be the same for all people in each age group, and they would have to cover preexisting conditions.
People without private insurance would be required to take the state government insurance. People would pay the government insurance though employer withholding and though sending the money to the state government. The cost of the government insurance would be limited to a certain percentage of a person’s total income. A person's total income could include income from capital gains, dividends, interest, gifts, and inheritances. Gifts and inheritances, in the form of buildings or assets not easily converted to cash, would likely not apply.
The percentage of income that is limited could be higher for older people, since the average cost is higher for older people. For example a 25 year old person’s government insurance cost could be limited to 3 percent of that person’s total income, while a 60 year old person’s cost could be limited to 12 percent.
This type of government plan would not directly compete with private insurance, but still it would keep private insurance companies from charging extreme amounts. Insurance companies competing to insure the healthiest people could drive prices lower. Since everyone is insured, health care providers would not have to charge more to cover the unpaid cost of the uninsured, and people won’t just get insurance when they are sick.
The government plan may need extra funds since the plan would be covering the less healthy people and people not paying the full amount. One possible way of getting extra funds would be to tax capital gains and dividends at the same rate as regular income for people with incomes over $250,000.
This type of plan would increase payroll payments on some people, however they would be covered. Raising the standard deduction amount and the exemption amount could somewhat offset this. People would have incentives to be healthy to find cheaper rates. Private insurance companies, knowing they will be keeping their customers, may provide incentives to customers to stay healthier.
