The Affordable Care Act: One Year Later

New Jersey was ahead of the game when it came to addressing the goals of the federal healthcare reform bill, experts agree, but making it all work will not be easy in the Garden State

Debate over the federal health care reform plan continues to rage in Congress, but at the state level work is quietly underway to implement the early elements of the law and to prepare for the more complex, controversial aspects still to come.

In New Jersey, healthcare experts give the state high marks for its work so far and for past efforts to provide affordable health insurance and strong customer protections. But the Garden State also faces significant challenges in achieving the goals of the law, given the state’s high rate of uninsured residents and its extremely high cost of healthcare.

The law — the Patient Protection and Affordable Care Act — was signed by President Obama at the end of March last year in an attempt to enroll tens of millions of uninsured Americans in healthcare plans, to improve coverage and patient care for millions more and to bring down costs for everyone. The law calls for expanding access to Medicaid, the publicly subsidized insurance program for poor and disabled residents, and also uses a carrot and stick approach to encourage enrollment in the private market: tax credits for individuals and businesses who buy insurance and, eventually, a penalty on those that do not.

Subsidized Health Insurance

In many ways, the reforms will have less affect – at least in the beginning – on residents here because many of its mandates simply bring the rest of the nation up to New Jersey’s level. The state already provides one of the nation’s most generous subsidized health insurance programs, through FamilyCare, which uses a mix of state and federal money to help cover more than 900,000 children and adults. State laws now require private insurance companies to offer coverage to patients with pre-existing conditions; it prohibits lifetime limits on certain benefit costs; and it allows some patients to remain on their parents’ plan until age 31.

Despite these benefits, there are still 1.3 million New Jersey residents lacking health insurance, which advocates say includes roughly 190,000 children. While estimates vary, Joel Cantor, the director of Rutgers University’s Center for State Health Policy, who is working with state officials to plan the law’s rollout, believes that in coming years nearly half of these now-uninsured New Jerseyans will be able to obtain insurance under the federal reform.

A New Jersey Policy Perspective report entitled “Good Medicine” praised the law for providing the state with the “opportunity and resources” to improve and build on its current programs. The law “makes it more likely that all children will be insured in New Jersey,” Senior Policy Analyst Raymond Castro wrote.

“In New Jersey we are a little bit ahead of the curve in terms of our health care standards,” added Citizen Action’s Crystal Snedden, who leads the consumer advocate group NJ for Health Care Coalition. “But we also have a real opportunity with some of the provisions in the law to get more people covered and bring down the cost of healthcare for everyone.”

Not everyone is a fan of the law. Sen. Robert Singer (R-Ocean), a longtime member of the health committee, is one of the sponsors of a Senate resolution that seeks to amend the state Constitution to block any law compelling people to obtain health insurance. While the bill has been stalled in a committee for over a year, Singer said he is growing even “more frustrated” as the federal law unfolds. He is in part concerned about what the law does not address: care for undocumented immigrants, a shortage of primary care doctors, and medical malpractice reform.

“We still haven’t answered the question of how to deliver this care to the masses,” Singer said this week. “The intent is there, it’s correct. But the way we’re going about it is wrong.”

Singer also worries about the reform’s impact on Medicare, the insurance program for seniors funded and run by the federal government. The New Jersey Hospital Association notes the law includes a reduction over the next decade of $4.5 billion in Medicare reimbursements for doctors and hospitals in New Jersey; while the reform seeks to shift many healthcare costs to other programs, like Medicaid, hospital officials are cautious about the outcome. Consumer advocates predict that seniors themselves will get better, less expensive treatment under the reform.

Others, like health committee Vice-Chairman Sen. Joe Vitale (D-Middlesex), disagree. As the architect of FamilyCare and leader of a healthcare reform working group, he said it’s high time to move forward.

“We have to do something,” Vitale said last week. “The current system — even fussing around the edges — doesn’t make it affordable for businesses or individuals.”

Gov. Chris Christie has made clear he is not a fan of the reform, although the state has declined to join others in a legal challenge to the law’s constitutionality. Officials at the Department of Banking and Insurance (DOBI), which is responsible for key elements of the reform, stressed that the department was an “implementer of PPACA, not a supporter.” But state officials also recognize that if they do not take action, the federal government will implement the rollout in New Jersey for them.

From the customer standpoint, the law essentially has two parts; greater access to Medicaid and the opening of state insurance “exchanges,” which feature built-in tax credits to make coverage more affordable for working people and small businesses. The bulk of these changes, including the mandates, don’t take full effect until 2014.

A Q&A regarding the exchanges and insurance regulations can be found on DOBI’s website.

Medicaid is administered by the Department of Human Services and information on the program and on FamilyCare is available on its website.

Pieces in Place

Some aspects of the law are already in place, including measures to help those struggling to cover the cost of their existing insurance. Certain small businesses became eligible this year for tax credits of up to 35 percent of their employee health insurance contribution, and some residents have reported benefiting from reforms that extend New Jersey’s existing consumer protections.

Jacqueline Germany’s story illustrates some of the reform’s early impacts. The West Orange businesswoman runs an interior design and green energy company that employed three fulltime workers, but health insurance costs – at $1,300 a month per person – made it tough for her to grow.

When Germany received a $2,000 tax credit this year, she was able to provide a richer plan to her employees. Shopping around saved even more, and she added a part-time worker to the plan. By leveraging this addition, she managed to provide some benefits to a fifth, part-time worker who also suffered from diabetes. When 2014 rolls around, she expects she will be able to do even more.

“Two-thousand dollars, it sounds like a paltry amount,” she acknowledged, “but the little pieces add up and it’s made all the difference in the world.”

Another part of the reform now in effect is NJ Protect, a state-run insurance program designed to offer more affordable coverage to people with pre-existing conditions. State law requires insurance companies to cover these patients, but there was a six-month waiting period before they could see a doctor and, for many people, the plans were prohibitively expensive.

“Availability was not the issue. The issue has been affordability,” said Marshall McKnight, a spokesman for DOBI, which oversees the program. NJ Protect serves as a temporary bridge program until the exchanges are up and running in 2014; it has no waiting period and costs are 30 percent lower than the private market.

Cantor, from Rutgers, has estimated there could be 20,000 state residents eligible for this program, but so far fewer than 260 people have signed up. In order to be eligible, a resident must have been without medical coverage for the previous six months.

He and others admit enrollment is a challenge. For one, this group already has guaranteed access to insurance — if they can pay for it. In addition, uninsured individuals sometimes suffer from multiple afflictions and issues — like chronic, debilitating diseases, drug addiction, and mental illness — that make them hard to reach. Language barriers complicate things further. Advocates stress that advertising and public outreach must be part of any effort to boost insurance rolls.

DOBI officials are working with Cantor and other experts to determine exactly how the insurance exchanges will operate, but Cantor says the goal is straightforward: “The idea is to make it as automated and easy as possible.” The state has secured nearly $3 million in federal planning grants for various aspects of the reform effort, and the law could provide another $141 million over time to subsidize the exchange.

Clear Parameters

Although regulations are still being drafted in Washington and Trenton, the federal law does set some clear parameters. The exchanges can be run by the government or a nonprofit and they must be open to individuals who earn between 133 percent and 400 percent of the federal poverty level — or between $24,350 and $73,240 for a family of three. The costs for consumers will be offset by a direct tax credit from the federal government, determined on a sliding scale based on income and plan premiums.

The exchanges will also be open to small businesses, which will then be eligible for their own tax credit of up to 50 percent of employee health insurance costs. In 2017 the exchanges expand further to include larger employers. Cantor predicts that the exchanges will help some 200,000 now-uninsured state residents obtain coverage.

Another 400,0000 New Jersey residents could get health insurance through the Medicaid expansion, Cantor predicts. The law raises the eligibility ceiling for Medicaid patients from 100 percent to 133 percent of federal poverty level, or from $18,300 to $24,350 for a family of three.

This change is designed to improve access and quality of care for scores of residents who are now “too wealthy” to qualify for existing subsidized programs, but too poor to purchase insurance on their own. Instead of receiving routine, preventative care, too often these individuals end up in emergency rooms getting more expensive treatments at taxpayer expense.

New Jersey has made significant efforts in the past to try and rope this group into coverage, largely by expanding FamilyCare to those with higher income levels. While the program has steadily covered children in families who earn up to 350 percent of the federal poverty level, the eligibility ceiling for parents themselves has yo-yoed from 37 percent to 200 percent of federal poverty level during the past decade, Castro notes in the NJPP report. He and other advocates say that when parents are covered, their children also tend to get more frequent — and better quality — healthcare. A funding cut in 2010 led to program changes that denied coverage to nearly 40,000 parents who could have been covered a year earlier, Castro noted.

“We need to get more people covered,” Snedden said. “In the long run it makes healthcare more affordable for the rest of us.”

Medicaid Reimbursements

Another reform advocates embrace is an increase in the reimbursement rates paid to doctors who treat Medicaid patients. In New Jersey, rates would essentially triple, bringing them up to the rate the federal government now pays for Medicare patients. The current payment structure is so low that doctors can only afford to treat a limited number of Medicaid patients, which seriously curtails access to care for many patients, explained Assemblyman Herb Conaway (D-Burlington), who is also a physician.

“Medicaid was a loss leader for doctors,” Conaway, the chairman of the Assembly health committee, said. “Changing that designation is going to have a significant impact on the availability of providers to treat these patients.”

Perhaps nothing will have as much impact on the reform effort as the implementation of the mandates, the most controversial element of the plan. Once the exchanges are in operation and the law is in full effect, three years from now, the federal government will start to assess penalties for those that do not have “essential benefits” coverage — a term that is still to be formally defined.

Individuals without coverage can be penalized $95 per person in 2014, rising to $695 by 2016; parents must pay half that rate for uninsured children. Businesses, depending on their size, could be assessed between $750 and $3,000 per uninsured worker. Waivers will be available to those below the federal poverty line and in certain other hardship situations.

While the mandate has served as a lightning rod for constitutional debate, healthcare advocates underscore that such a mechanism is critical to getting people enrolled in coverage. And the more people covered, the less the risk and the lower the cost.

“The system doesn’t work without a mandate,” David Knowlton, president of the New Jersey Health Care Quality Institute, told a Senate panel during a hearing on the reform effort in early March. “You cannot pay for the sick without the help of the healthy.

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