TL;DR: Gold level Covered California plans with a 90% subsidy of the median priced plan.

The healthcare system in the United States is a disjointed mess. Ever since the federal wage controls of the 1940s that forced businesses to compensate their workers with healthcare instead of money, we have had an employer based system that locks people into their jobs and makes it hard for small businesses and start ups to attract talent.

Whatever you think about Obamacare and the subsidies they are now fighting about in congress, it created a mechanism that standardized plans and built state wide marketplaces. These two reforms provide a pathway to rationalize the insurance market and pave the way for universal coverage.

California has an opportunity to move down that pathway.

The goal is to use the marketplace, Covered California, to allow Californians to choose the healthcare that best meets their needs, regardless of their employer, and eliminate the need for employers to manage and contract for healthcare for their employees. The proposal isn’t a government takeover of healthcare, but rather a government takeover of some Human Resources.

But the details matter. The plan is to have people purchase plans on Covered California, with a 90% subsidy of the median priced Gold level plan.

It cannot be a 100% subsidy because there has to be a market mechanism, or prices will spiral out of control. When the only customer is the government you end up with the Raytheon effect, and prices are set by lobbing efforts not providing value. More importantly this subsidy is roughly equivalent to the majority of employer sponsored plans.

The first step would be to transition the roughly 200,000 California state employees to this Covered California mechanism. Given that exchange plans tend to be lower cost even without subsidies than the current employer provided plans, the state and its employees should see lower costs. Also the hope is the public sector unions take the opportunity to help improve the system.

Once the state employees have proven the system works, it is time to extend the marketplace to include local employees and retirees. And then on to the Medi-Cal population, and ultimately to all residents of California. This will likely require a payroll tax of 4-5%, but since employers are already paying that in direct healthcare costs it should be a wash in most instances.

While there are a lot of details that would need to be negotiated, all of the major infrastructure pieces currently exist. It is just time to make them work together to produce a more efficient and lower cost system that extend healthcare coverage to all Californians.