New Jersey’s individual market for health insurance, including the subsidized ACA marketplace, is in dire need of state action to control premium increases if the state is not to suffer a sharp increase in its uninsured population.
Premiums in the state’s individual market rose an average of 22 percent in 2018. A large part of that increase was a direct result of deliberate Trump administration sabotage: cutting off federal reimbursement to insurers for the Cost Sharing Reduction (CSR) subsidies they are obligated to provide to qualifying low-income enrollees in the ACA marketplace. The cost of those subsidies was priced directly into 2018 plans.
Now the market is braced for the next round of Republican sabotage: repeal of the individual mandate, the requirement that those for whom affordable insurance is available obtain it or pay a tax penalty. That penalty was zeroed out in the massive tax cut Republicans passed last December.
The Congressional Budget Office forecast that mandate repeal in itself would generate premium increases of 10 percent per year throughout the next decade. An analysis of the impact on states commissioned by Covered California the state’s ACA marketplace, put New Jersey in the highest risk category, where premiums are forecast to rise as much as 90 percent over three years if action is not taken to strengthen the markets. Early insurer rate requests filed in Virginia and Maryland are showing sky-high increases. Maryland’s insurance commissioner is warning of a death spiral and placing hope on the state’s reinsurance waiver proposal.
Two bills to stave off sabotage
The New Jersey Legislature has taken action — but it’s not yet law. On April 12, both houses passed the New Jersey Health Insurance Market Preservation Act (A-3380), which replaces the national individual mandate with a state-based version that more or less reproduces the terms of the repealed provision. Paired with that measure is the New Jersey Health Insurance Premium Security Act (S-1878), which directs the state Department of Banking and Insurance to seek federal funding for a reinsurance program for the state’s individual market, designed to reduce premiums 10 percent to 20 percent. The mandate bill stipulates that revenue collected via the tax penalty will further fund the reinsurance program.
Reinsurance, which partly reimburses insurers for the claims of their most expensive enrollees, is a proven means of reducing premiums. The federal Department of Health and Human Services (HHS) has actively encouraged states to submit ACA “innovation waivers” seeking federal funding to establish such programs, since lower premiums mean lower federal subsidies. Three states have so far been granted such waivers, and about 10 more are in various stages of pursuing them. Alaska’s reinsurance program led to a 22 percent drop in premiums in 2018; Minnesota’s, to a 15 percent drop.
If the two bills become law and the feds approve the state reinsurance proposal, premiums in the individual market can reasonably be expected to be 20 percent to 30 percent lower in 2019 than they will be if no action is taken.
New Jersey might then celebrate a place in the vanguard of states that are taking active measures to counteract Republican sabotage of the ACA.
Questions of cost
That’s still a “might.” Gov. Phil Murphy has not publicly committed to signing these bills. He has 45 days to decide, dating from April 12.
Cost might be an issue. With the federal contribution and revenue from the mandate figured in, preliminary estimates confirmed by acting DOBI commissioner Marlene Caride indicate that the state might be left with as much as $40 million per year to make up.
Sen. Joseph Vitale (D-Middlesex), the bills’ lead sponsor in the Senate, does not believe the funding will be a major barrier. In analyzing the cost, he told me, “We were very conservative.” If revenue is needed, “We’ll identify a source when we have more information, we have time to figure that out.” The bill will not come due until fiscal year 2021. One possible source is an assessment on insurers, which was in an early draft of the bill.
Vitale believes that Murphy will sign the bills. “They are just going through their normal process of analysis. They’re looking at it with a fresh set of eyes, doing what they should do.”
“I would be extraordinarily disappointed if the bills don’t get signed,” he added.
A health insurance market at risk
The need for market stabilization is acute. It’s true that those who buy their own insurance are insulated from premium hikes if they qualify for subsidies in the ACA marketplace, as about 60 percent of enrollees in the state’s individual market do. The subsidies are income-adjusted and rise as premiums rise. But about 150,000 New Jerseyans enrolled in ACA-compliant plans don’t qualify for subsidies, and they have borne the full brunt of premium increases north of 20 percent. Unsubsidized people in their 50s and 60s now typically pay $600 to $1,000 per month for individual coverage and upward of $2,000 per month for family coverage, as testimony from BlueWaveNJ illustrates.
Equally important, mandate repeal is likely to reduce Medicaid enrollment. The mandate induces many people to explore their coverage options, and many who apply on the federal exchange, HealthCare.gov, find that they are eligible for Medicaid. CBO forecast that mandate repeal would result in 5 million fewer Medicaid enrollees nationally over 10 years.
Without a mandate, the number of uninsured New Jerseyans will increase by about 300,000 over 10 years, according to an analysis by Raymond Castro of New Jersey Policy Perspective.
Throughout last year’s campaign, Gov. Murphy promised to do his utmost to defend New Jersey against Republican efforts to undermine ACA programs. While he did not specifically endorse a state mandate and reinsurance program, these are plainly the most cost-effective means of maintaining access to affordable healthcare for New Jerseyans who might otherwise become uninsured. The state mandate should be established, and the reinsurance waiver proposal pursued before insurers finalize their offerings for 2019.