A coalition of Democrats and Republicans who really support small businesses is forming to make certain that you can get health insurance at every phase of your life. They should soon send a bill to the Senate that will make our health insurance market make sense.

Can you think of an industry that makes its money by avoiding customers? Doesn't that seem like a really weird concept? Well, there is one: the health insurance industry. Private insurers, like Aetna, carefully screen their customers to keep the ones most likely to have health problems out, a.k.a., "cherry picking." They look for small companies filled with healthy, young workers and offer them great plans. Then, they just rake in premiums, because even at reasonable rates they are making money because the young turks don't get sick.

They can do this because Pennsylvania permits insurers to set rates based for an employer based on the health status of its employees. So, Blue Cross & Blue Shield have to insure everyone. All the middle-aged and older workers end up with the Blues, while Aetna and others steal the healthier workers. By "steal," I mean they rob these larger pools of the healthy workers who bring costs down. That's the same trade-off we've always had with insurance. I pay in now while I'm healthy so that, in exchange, I won't have to pay in so much when I'm older.

That's not how it works anymore. Click "Read More" to find out what legislators are trying to do about it.

Older workers in Pennsylvania fear losing their jobs because they know if they try to change employers, their age (and the effect it would have on an employers premiums) might inhibit them from getting a job, and they know they can't afford it on the individual market.

Remarkably, though, Rep. Curt Schroder (R-Exton), took the side of the little guy in a recent fight around reforming the insurance market. He offered an amendment to Rep. DeLuca's version of HB 2005 that made it even stronger. The bill does a lot of good things, but the one that has everyone amazed is this: Schroder wants to make insurers set rates in the individual market taking only age, geography and family size into consideration.

Let's say you are a 55 year-old guy with a heart problem in Berks County and you want to go into business for yourself. Only, you don't feel you can, because you know that insurers would see your heart problem and really gouge the hell out of you on premiums. In other words, you can't afford to go into business for yourself.

If HB 2005 becomes law, though, the situation would be a little better. The insurer would have to offer you a premium not based on your own particular situation, but on the average cost of insuring any 55 year-old guy in Berks. Of course, a 55 year-old guy is more likely to have a heart condition than a 30 year-old guy, so you'll still pay more. That said, you won't get nailed while your 55-year old, marathon running neighbor gets a deal. It will be an average of you both and all the other 55 year-olds in the community.

Which is fair to the insurer, too, because they might, now, set a rate based on you alone, but they are still averaging you in with all the other 55 year-olds they have on their books anyway.

You could argue it's not fair to the marathon runner, but by that line of thinking we'd just drop the whole notion of insurance and pay everything out of pocket as we need it. Which just doesn't work.

The legislation largely only pertains to insurance purchasers in the small group market, but that's because there is a different set of problems in the small group market than there is with big insurers. It's the small purchasers that get gouged, and that's why the state is singling them out. Guys like Rep. Schroder understand the way that health insurance costs are strangling business and want to make the market work correctly again so that the owners can quit working about making premium payments and get back to their core business.

Nevertheless, the NFIB (here and here) and the Pennsylvania Chamber, supposed defenders of small business, are out in Harrisburg lobbying against HB 2005. Why's that? Could it be because they get members by offering them slightly better health insurance rates by joining? You tell me.

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Philadelphia Unemployment Project
Pennsylvania Health Access Network