State Democrats Pursue Individual Mandate to Help NJ Insurance Market

Over some Republican objections, Democratic lawmakers promote workaround for Trump administration’s repeal of key Obamacare regulation

ACA individual mandate
Most New Jersey residents would be required to obtain health insurance — or pay a tax penalty — under a proposal designed to help shore up the state’s insurance market through a mandate similar to one that was once part of the federal Affordable Care Act.

Yesterday, the state Senate’s Commerce Committee approved the Democratic legislation, introduced earlier this week, over objections from several Republican members who were concerned about the implications for already cash-strapped citizens.

Supporters said the measure is needed to encourage healthy residents to obtain coverage, which helps spread the cost of care, and stressed it must be implemented in the coming months so that insurance companies factor the impact into premium rates for next year. The penalties for not obtaining insurance would be set by state officials, based in part on the average cost of plans in the Garden State.

Make insurance more affordable

“Having everyone, as many people as possible, in insurance makes it more affordable,” said Sen. Joseph Vitale (D-Middlesex), who sponsored the bill; Assemblyman John McKeon (D-Essex), has introduced a companion version. If healthy people don’t enroll in the market, Vitale said, “it has an awful effect on rates for those who do take the responsibility to have health insurance.”

The committee adopted a second measure, also sponsored by Vitale and McKeon, that directs the state Department of Banking and Insurance to seek federal permission to set up a healthcare reinsurance fund, a pool of money that could be used to help insurance carriers pay for the most expensive treatments. The fund would be fueled by federal sources and an assessment on insurance companies, which one critic noted is also likely to impact consumer prices.

“These really go hand and glove” with each other, Vitale said, noting that several other states, under both Republican and Democratic leadership, have already instituted reinsurance programs. “Passing both of them together makes both of them work for us better,” he said.

Garden State Democrats have considered several options to offset the potential impacts of changes to the ACA, which expanded health insurance coverage to more than 800,000 New Jersey residents, including some 340,000 who purchased policies through the individual market.

And Better Choices, Better Care NJ, a coalition of business leaders and other healthcare payers, urged officials to consider a state-based mandate, after conducting a small-business economic impact study, as part of a 15-point plan it outlined late last year. But this is the first legislation to address a state-level individual mandate, (which was repealed last year on the federal level as part of President Donald Trump’s tax reform plan).

28 percent rise in cost this year

While Trump’s tax plan was signed in December, and the repeal of the individual mandate doesn’t impact taxpayers until next year, concern about its impact, along with confusion over efforts to repeal and replace other elements of Obamacare, had a significant impact on insurance costs for this year, experts said. In New Jersey, the cost of policies on the individual insurance market rose as much as 28 percent this year, nearly three times what they would have without the uncertainty surrounding the federal policy, according to the state’s largest insurance provider.

Ray Castro, the healthcare program director for New Jersey Policy Perspective, a progressive research group that has tracked the ACA, said these changes are estimated to have added as much as $65 million to premiums this year — or an average of $400 more for individual customers and an additional $1,600 for a four-person family.

The impact of having no individual mandate also compounds over time, Castro warned. Based on data from the nonpartisan Congressional Budget Office, premiums in the Garden State could continue to climb by 10 percent annually over most of the next decade. These higher costs would put insurance out of reach for an additional 340,000 residents, he said, and drive up charity care expenses, whereby state money is used to help hospitals pay to treat uninsured individuals.

“The long-range implications of not replacing this provision are staggering,” Castro said. “Restoring this penalty is one of the most cost-effective ways that the state can reduce premiums since it costs the state nothing other than administrative costs and avoids a major loss in federal funds” it now receives through Medicaid.

Penalty for those who don’t buy

The bill (S-1877), the “New Jersey Health Insurance Market Preservation Act,” would require those who don’t have health insurance plans that meet certain minimum standards to pay a fee to the state. This penalty would be determined under calculations previously used in the ACA, based in part on the cost of an average bronze-level plan sold on New Jersey’s individual health insurance market.

Exemptions would be available to individuals who could not afford coverage or for those who earn too little to pay tax, based on regulations to be determined by the Department of Banking and Insurance. The State Treasurer would also be empowered to consider hardship and religious exemptions on a case-by-case basis.

Sen. Gerald Cardinale (D-Passaic), called the measure “wrongheaded,” and objected to the concept of taxing individuals who have not chosen to purchase a specific product, in this case health insurance. “I don’t want to be insulting, but I think the tendency of legislators to try and run people’s lives is not warranted. We’re not that smart. People can make decisions for themselves,” he said.

The measure, which would take effect in 2019 but requires advance planning among state officials, was amended by the committee to ensure that all tax penalties collected be deposited in a newly-created fund; that fund would be used to help pay for reinsurance claims.

How would state determine affordability?

Additional amendments might also be needed, suggested Maura Collinsgru, healthcare policy director for New Jersey Citizen Action. While she supported the idea “in principle,” she worried about how the state would determine who could not afford coverage.

Collinsgru also flagged language that would make a taxpayer responsible for the coverage of all dependents, noting that this could disadvantage families in which one breadwinner is covered by an employee-sponsored plan, but other members are unable to afford coverage. As a result of the ACA’s “family glitch,” she said these families are often unable to obtain federal subsidies to help pay for care because one parent has a job and is covered.

“While we know this bill is modeled after the Affordable Care Act, the Affordable Care Act didn’t get it all right,” she said, adding that these shortcomings are a concern “in high-cost states like New Jersey.”

The second measure (S-1878), the “New Jersey Health Insurance Premium Stabilization Act,” would require the DOBI to request a federal waiver for certain Obamacare provisions in order to establish the state reinsurance fund to help offset extreme costs incurred within the individual market.

It would establish a board that would work with the state insurance commissioner to design the plan, including establishing a claims threshold for reinsurance payments of at least $50,000 and a cap for total payments of $250,000 or less. These leaders would also come up with a fee structure to assess insurance carriers to fund the program and the money would be held in a newly created fund under the Treasury Department.

Both bills now head to the Senate Budget Committee for consideration.

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