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Cost of Health Insurance on Individual Market in NJ to Drop Significantly in 2019

Governor heralds new state law and federal approval of another New Jersey program as main factors in curbing prices

Gov.Phil Murphy
Credit: Edwin J. Torres/NJ Governor's Office
Gov. Phil Murphy at press conference on lowering health insurance premiums last week, with Sen. Joe Vitale in background

The price of health insurance on the individual market for New Jerseyans will drop more than 9 percent next year on average. The price decline is due largely to recent changes in state law designed to stabilize the state’s insurance system and federal approval of another state-based program.

Nearly 300,000 New Jerseyans purchase this type of insurance on the federal Affordable Care Act website healthcare.gov, or directly from insurance companies that sell policies on the state’s individual market. Most earn too much to qualify for public programs like Medicaid or FamilyCare, or are too young to qualify for Medicare, but cannot access insurance coverage through their jobs.

Officials had expected limited increases in the cost of this type of insurance this year compared with the cost elsewhere in the country, thanks to a law Gov. Phil Murphy signed in May. But federal approval of a second program, signed into law at the same time, will lead to decreases for most if not all policies sold for 2019 through this market. These lower costs are also expected to enable thousands of additional residents to afford to enroll in these plans, officials suggest.

Murphy joined Cabinet officials and state lawmakers Friday to announce the 9.2 percent decline for 2019 policies, saying it was the result of laws he signed this spring. He also pledged to continue reforms designed to protect and expand insurance coverage and access to medical care.

“Our work is based on the core belief that health care is a right — not a privilege,” the governor said, noting that federal attacks on the ACA have led to rising costs for these consumers. “We have taken deliberate actions to defend the gains made by the ACA and our work is demonstrating results,” he said.

Cost increases had been on cards

In late July, the state released the rate schedule insurance companies had requested for the coming year, which ranged from increases of less than 1 percent to just over 9 percent, or a nearly 5.8 percent price hike, on average. This growth would have been much higher — some 12.6 percent, on average — were it not for one of the laws Murphy approved in May, a measure to create a state-based individual insurance mandate.

That law involves a state income-tax penalty for individuals who do not obtain health insurance coverage and is designed to spread the health-insurance risk among the widest group possible to reduce costs. The program will take effect in 2019, when the federal mandate to obtain health insurance disappears as a result of changes in the tax-reform bill President Donald Trump signed late last year.

But the July figures didn’t reflect the impact of a second law, which created a healthcare reinsurance program designed to help commercial healthcare plans offset their highest claims costs. New Jersey’s program — which required a federal waiver that was approved in mid-August — will result in an additional savings of 15 percent, on average, for these plans. As a result, the cost of coverage is expected to decline by close to 9.3 percent.

The reinsurance program creates a monetary reserve, thanks to a mix of state and federal dollars, that helps protect insurance companies from the cost of the most expensive consumer claims.

Officials said the news was particularly heartening given the cost hikes in the current year. Policies on the individual market went up by more than 20 percent in 2018, largely because of instability concerning the ACA, insurance providers said.

After Massachusetts

marlene  caride
Marlene Caride, Commissioner of the Department of Banking and Insurance

“States across the country are increasingly challenged in their efforts to ensure residents have access to quality affordable health coverage and to protect against disruption in the market,” said state Department of Banking and Insurance Commissioner Marlene Caride. “Under this administration, New Jersey has worked to stabilize the market and to implement innovative measures to improve access and affordability.”

New Jersey was only the second state to adopt its own individual insurance mandate, after Massachusetts, although similar laws are in the works in several other jurisdictions. The Garden State is one of more than a dozen to have applied for a federal waiver to create a reinsurance program; seven others have had their programs approved, including Maryland, which also got the go-ahead in August.

The Centers for Medicaid and Medicare Services (CMS), the federal agency that oversees the waiver process, shows that Hawaii was the first to get approval for a reinsurance program, in December 2017, followed by a number of states on the West Coast; a number have also begun the process and dropped out. Savings are based on the predictions of insurance experts who design each state’s program; the plans approved by CMS this year anticipate reductions that range from 9 percent (Maine) to 30 percent (Maryland), according to filings online.

Vitale: ‘Not going to allow the Trump administration…’

In New Jersey, although the reinsurance program is predicted to allow for a 15 percent savings on average, the actual reductions will be based on the cost of each plan but are likely to range from 5.8 percent to 14.7 percent (depending on carrier and product). According to the fact sheet accompanying the state’s submission to CMS, these savings could also lead to 2.7 percent greater enrollment in this individual market. It may also, however, reduce the level of federal funding available to consumers to help offset premium prices.

The New Jersey Health Insurance Premium Security Plan will be a five-year, state operated program to offset the impact of the highest-cost claims on the larger market; it will reimburse carriers up to 60 percent for claims between $40,000 and $215,000. Money for this reserve will come from tax penalties generated through the state’s new individual-mandate law, annual support from the general fund, and an undetermined amount of federal dollars, based in part on the economic profile of the consumers who purchase policies next year.

“We were not going to allow the Trump administration to undermine the insurance market,” said Sen. Joseph Vitale Jr. (D-Middlesex), who sponsored the reinsurance law and the individual mandate bills with Assembly Speaker Craig Coughlin (D-Middlesex) and Assemblyman John McKeon (D-Essex), among others. “We seized the opportunity to take the actions needed to hold down expenses and protect the accessibility to needed health care services for New Jersey residents.”

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