Pennsylvania House Democrats propose 10% payroll tax for universal health coverage

Pennsylvania House Democrats have introduced legislation to replace private health insurance premiums with a single-payer system funded by new payroll taxes. The proposal aims to address rising costs that consulting firm Marsh projects will hit 8.2% for employers in 2027, the largest increase recorded since 2003.

Under House Bill 2763, employers would contribute a 7.5% payroll tax while employees would pay 2.5%, with employers permitted to cover both amounts. The plan would eliminate deductibles and copays for all residents, replacing previous spending on premiums and out-of-pocket expenses with this centralized funding model.

Rep. Greg Scott, a Democrat from Montgomery County, argued for the shift during an Oct. 5 press conference, stating, “In my household, I believe healthcare should be a right. I don’t believe it should be a privilege reserved for those that can afford it.” The bill mirrors Senate Bill 1465 and seeks to make coverage more sustainable for small businesses that currently struggle with rising premiums.

KFF data shows that job-based plans for workers are 9% higher than in 2025, with an annual family cost of $7,471. For businesses with fewer than 200 staff, costs are even steeper. Greg Moreland, Pennsylvania State Director for the National Federation of Independent Business, described the current situation as unsustainable, noting that many business owners feel they are at their breaking point.

Critics and analysts point to the complexity of implementation. A RAND Corporation study on a similar plan in New York found that costs would depend heavily on assumptions about provider payments and administrative efficiencies. Christine Eibner, a co-author of that study, noted that the actual cost would be sensitive to how state officials negotiate price levels and curb spending.

Hospitals currently earn significantly more from commercial insurance than from government plans. The Pennsylvania Health Care Cost Containment Council reports that a commonwealth hospital earns an average of $31,800 per commercial patient discharge in 2025, compared to $16,990 for Medicare and $21,658 for Medicaid. This revenue gap complicates the transition to a government-negotiated system, which would require states to negotiate with the federal government over existing tax-funded programs.

Small business leaders remain divided. Drew Whiting, CEO of Erie Downtown Development Corporation, supported the universal model, comparing the U.S. system to a company that spends twice as much for worse results than its competitors. Moreland, however, expressed caution about government management, citing inefficiencies in the Veterans Affairs system and arguing that federal action is needed to solve the national crisis.