Opinion: A Health Insurance Marketplace for New Jersey

Joel C. Cantor | March 27, 2019 | Opinion
Are there advantages to the state taking over the Affordable Care Act healthcare marketplace from the federal government?

Credit: Amanda Brown
Joel C. Cantor
Last week Gov. Murphy announced plans to transition from the federal Affordable Care Act’s healthcare.gov exchange to a state-operated health insurance marketplace. The Murphy administration argues that this shift will be budget-neutral and that it will enable the state to achieve a more stable and affordable market for individually purchased health insurance.

There is potentially much to be gained from this move. Replacing the federal website with one that is run by the state is only a small part of the change. Far more important is that by managing the enrollment process, New Jersey will be able to do more to give consumers the information, time, and plan options they need to enroll in coverage that best meets their needs. A state-based marketplace will also wrest control of data needed to develop and evaluate strategies to reduce premiums and increase enrollment over time.

The Trump administration has made numerous moves to undermine the effectiveness of the ACA marketplaces, including reducing consumer outreach and education and shortening the open enrollment period. These changes no doubt are leading to lower enrollment among young and healthy people, which in turn puts upward pressure on insurance premiums. After rising steadily since implementation of the ACA, state data show that enrollment in the New Jersey individual market declined last year, as it did in most states. We don’t know the extent to which reductions in outreach and open enrollment contributed to this decline. There are other factors in play as well, but it is worth noting that state-based marketplaces have outperformed the federal exchange. The strategy announced last week by the governor will allow New Jersey to improve our coverage platform, boosting enrollment, improving the risk pool, and easing upward pressure on premiums.

The move to create a state-based marketplace fits into New Jersey’s broader policy strategy to strengthen the health insurance market for people without access to employer-sponsored coverage, Medicare or Medicaid. Last year New Jersey took important steps to improve the stability of the individual insurance market, including implementing penalties for most Garden State residents who fail to buy coverage and establishing a reinsurance fund to mitigate the financial impact of high-cost outliers in the individual health insurance market. The state also stringently regulates insurers to keep plans that skirt pre-existing condition protections or do not offer full benefit packages out of the market. But more can be done to increase enrollment and improve affordability.

What NJ healthcare stakeholders thought in ACA’s early days

Here is an interesting historical footnote. When the ACA was first being implemented, New Jersey considered creating a state-based exchange. In 2011, we at the Rutgers Center for State Health Policy surveyed over 600 state healthcare stakeholders, asking, among other things, whether New Jersey should set up its own exchange or leave it to the federal government.

Click to expand/close
Their answers could not have been clearer: The majority of every group surveyed endorsed a state exchange. Among the strongest supporters of a state-run exchange were respondents from labor unions (100 percent), health insurers (95 percent), insurance brokers and agents (88 percent), and business trade groups (70 percent). Individual business representatives were the least supportive, but even a majority of them endorsed a state-based exchange.

Despite this high level of support, the case for a state-based exchange was actually much weaker at the onset of the ACA. The benefits were not clear, and the risks were high. In particular, building the technology required to create the enrollment platform was far from trivial at the time. Of course, anyone who was paying attention to the launch of healthcare.gov remembers the epic technological failure that ensued. Somewhat less visible were similar problems in many state-based exchanges at the time, some of which failed entirely. I have no doubt that few in New Jersey regretted the decision to remain on the federal platform. But that was then.

Now, years later, the technological hurdles to creating the marketplace are far lower. Healthcare.gov functions well, a dozen states run their own successful marketplaces, and five others have built their exchanges on the federal platform. New Jersey will not bear the risk of building the exchange from scratch and will be able to choose from a number of proven options.

The Affordable Care Act just reached its ninth anniversary. Many years ago, New Jersey decided not to create its own exchange. Today we consider this question again in a very different environment. Is there an advantage to creating a state-based marketplace? The answer now is clearly “Yes.” The technological risks are lower, and the potential benefits far higher. There will be at least two, and perhaps six, more years of Trump administration efforts to undermine the ACA. A state marketplace would go a long way to protect us from most things that might come our way, and New Jersey would be wise to do what it can to improve the most fragile part of our insurance market.