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NJ Could Be Second State to Enact Individual Mandate

Massachusetts got there first, but two proposed bills could replace ACA's federal mandate and offset price of pricey procedures

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New Jersey could become the second state in the nation, after Massachusetts, to assess an income tax penalty on residents who are financially able, but fail to obtain health insurance, under a bill designed to replace what was once a federal mandate.

The proposal, which passed the Senate budget committee on Monday, is intended to strengthen the Garden State's health insurance market in the wake of changes to the federal Affordable Care Act. The insurance mandate was eliminated as part of the ACA under a tax reform bill signed by President Donald Trump in December.

Bill sponsors Sens. Joseph Vitale (D-Middlesex) and Troy Singleton (D-Burlington) believe a tax penalty is needed to drive younger, healthier individuals into the healthcare insurance market in order to spread the risk and can help offset cost increases throughout the system.

Offsetting high costs

Vitale and Singleton are also backing a plan that calls for the state to create a healthcare reinsurance program, a pool of funds — derived from federal sources and an assessment on insurance companies — to offset the cost of the most expensive treatments, which can destabilize the market and drive up prices overall. This bill also passed the Senate panel Monday.

"The assault on the ACA by President Trump puts the newly insured at risk of losing their healthcare coverage," Vitale said. "These bills will help stabilize the insurance market and preserve the viability of the individual mandate. Having as many people as possible in the insurance program makes it more affordable for everyone."

The ACA, or Obamacare, used both carrots, like the subsidies to help consumers purchase policies, and sticks like the tax penalty, to expand access to care for millions of Americans.

In New Jersey, 800,000 people were added to the insurance rolls through the ACA, including at least 300,000 who purchased coverage directly through the individual insurance market; eight years ago, this market covered some 130,000, many of whom had bare-bones, high-deductible policies. The uninsured rate dropped from 13.2 percent before the law took effect to 8.7 percent, the lowest in three decades.

Double-digit price increases

But rising costs and uncertainty about the federal law — which has been under constant attack since Trump took office — have led to double-digit price increases for 2018, on average. Four companies have left New Jersey's market in the past two years.

Trump's repeal of the individual mandate takes effect in 2019 and experts believe it will only continue this slide. According to the nonpartisan Congressional Budget Office, this aspect of his tax reform is slated to save the federal government $338 billion over the next decade, but could lead 13 million Americans to lose coverage they now have.

"The magnitude of the consequences of that decision will usher in an era of higher health insurance costs for everyone and lower health coverage rates," Singleton warned.

The Massachusetts mandate

While a number of states have enacted laws to implement insurance-related elements of the ACA — and reports suggest legislators continue to examine other options — the Bay State is currently alone in having a state-level individual mandate.

"Massachusetts was the first, and technically, the only state to do this strictly through state law," said Richard Cauchi, the health program director for the National Conference of State Legislatures. The 2006 law established insurance requirements for both business and individuals, he said, and served as a model for the ACA.

Another 18 states have adopted statutes that prohibit their Legislatures from adopting an individual mandate, Cauchi said, five of which added this ban to their constitution. This group includes New Hampshire, Ohio, South Carolina, and Florida.

The New Jersey mandate proposal (S-1877), the New Jersey Health Insurance Market Preservation Act, has triggered concerns among some Republicans opposed to government mandates that it would force residents who don't have insurance plans that meet certain standards to pay a fee as part of their income tax.

The charge would be calculated through a formula used in the ACA, based in part on the average cost of a bronze-level plan in the Garden State. Individuals who don't earn enough to pay tax, or cannot afford coverage, would be exempt, based on regulations to be drafted by state officials. The law would take effect in 2019.

The second bill (S-1878), dubbed the New Jersey Health Insurance Premium Stabilization Act, would require the state Department of Banking and Insurance to request a federal waiver to establish a state reinsurance fund. The account could be used to help offset significant claims, up to a certain limit, with parameters to be set by state officials. (A previous draft said claims must be at least $50,000 and payments would be capped at $250,000.)

Vitale said such waivers "offer a promising avenue for states to create reinsurance funds to bring about more stability and certainty to a marketplace" that has been destabilized by federal reforms. "We seize the opportunity to take the actions available to hold down expenses for services that improve healthcare for middle class families and others," he added.

Assembly versions of both bills, sponsored by Assemblyman John McKeon (D-Union), have yet to receive a hearing.

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