Raft of Bills Advance to Ease Way for State Health Insurance Exchange

Lilo H. Stainton | June 10, 2019 | Health Care
Democratic-led effort to replace federal exchange; insurance and business interests, although generally supportive, have questions

Credit: NJTV News
A health insurance navigator at New Jersey Citizen Action helping to find affordable coverage, November 2018
New Jersey lawmakers have advanced a dozen bills to create the infrastructure for a state-based health insurance marketplace. The bills are part of a Democratic-led effort to better control the cost and quality of these policies and protect against attacks at the federal level by the Trump administration.

But, while supporting the legislation in concept, insurance and business representatives have raised questions about some of the details, including language that would enable New Jersey to hike the tax on certain insurance plans to 5 percent — from the current 3.5 percent — which critics said would add to consumer costs. Some Republican lawmakers also have flagged this as a concern.

Versions of the bills were approved by the Senate Commerce Committee last Monday and the Assembly Financial Institutions and Insurance Committee Thursday, some along party lines. They would empower the state Department of Banking and Insurance to establish its own system to craft, market and sell federally subsidized health plans to lower-income workers who do not get insurance through work and earn too much to qualify for Medicaid. Currently in New Jersey, these “individual market” plans are sold through the federal health insurance exchange website, healthcare.gov.

“With the federal government in turmoil, I’m glad the state Legislature is doing everything we can to ensure that the people who benefit from the Affordable Care Act will continue to be protected,” said Senator Joseph Vitale Jr., the health committee chair and a lead sponsor of several of the measures. “We cannot leave the health and safety of New Jerseyans up to the whims of the Oval Office.”

“This legislation, particularly the state-based exchange for health benefits plans, will go a long way in ensuring our state can offer affordable healthcare to all of our residents,” Vitale (D-Middlesex) said.

Worried about cost to consumers

Ward Sanders, president and CEO of the New Jersey Association of Health Plans
The proposals were endorsed by healthcare advocates, including hospitals, clinical professionals and NJ For Health Care — a coalition of community, labor and social justice groups that have long pushed for expanded insurance coverage through the ACA and other mechanisms. However, several people who testified Monday said they favored a state-based exchange but worried establishing this system might cost consumers more than it would to continue to use the federal government’s.

“One of our goals is to make sure this is run efficiently and outperforms the federal exchange. That’s the reason to do this,” Ward Sanders, head of the New Jersey Association of Health Plans, testified Monday. “To tax insurance to make insurance cheaper doesn’t really work.”

Lawmakers amended the Senate version of the bill related to the fee on exchange plans, which is estimated would raise $55 million a year to support its operation, to cap this tax at 5 percent. But Sanders said that still would allow the state to impose a burden far beyond the 3.5 percent now charged to support the federal system. (The federal fee is slated to go down to 3 percent next year.)

In March, Gov. Phil Murphy, a Democrat, announced his intention to take control of the exchange — a transition he said would enable the state to create higher-quality plans, better protect against cost increases, and control how plans were marketed and sold. Under Republican President Donald Trump, the federal government has drastically reduced funding for outreach and marketing of these policies, and cut in half the amount of time people have to enroll each fall.

Democratic lawmakers introduced drafts of enabling legislation in late May, which would allow DOBI to collect a tax — that now goes to the federal government — to fund the creation of a website and sales platform for plans tailored to individuals; the system covered nearly 290,000 people at the end of 2018, according to state statistics. (More than two-thirds of these consumers obtain federal subsidies to help offset the costs; others benefit from the lower prices and comprehensive benefits built into these products, but purchase them directly from insurance companies without any subsidy.)

Integrating policies for small businesses

The proposals also call for DOBI to integrate the small-business insurance market into this same system, although there are few details of how this would happen. Small-business policies covered nearly 330,000 people in companies with fewer than 50 employees, at the end of last year, in New Jersey with plans sold through the state and the exchange.

Sanders, with AHP, is concerned that if small-business plans are rolled into the same exchange as plans for individuals they could be subject to the same tax of up to 5 percent, adding significantly to the costs of these products. And business representatives are concerned what that would mean for employers already struggling to provide coverage for their workers.

“We support an exchange, but we are concerned about the costs that go along with that,” said New Jersey Business & Industry Association vice president Tony Bawidamann. “Healthcare is one of the top issues for (our members) — one of the top costs,” he said.

As of 2018, some 28 states — including New Jersey — made use of the federal system for the sale of individual and small-business health insurance plans and 12 jurisdictions, with Washington, D.C., operated these markets themselves. Nevada is now in the process of shifting from a federal to state system, scheduled to start this fall; lawmakers there anticipate it can be run for a fee of 1.5 percent on the plans sold, saving the state half of the $12 million the federal government now spends on the operation, according to Healthinsurance.org, an industry publication. New Mexico is planning a similar shift in 2021 and Oregon is also considering taking control of its system.

While healthcare advocates in New Jersey have long pushed for a state-run exchange, dating back to 2012 at least, former Gov. Chris Christie, a Republican, declined to embrace the process and left it in the hands of the federal government. But, as the Trump administration ratcheted back support for the exchange — and attacked other elements of the ACA, or Obamacare — Democrats in the Garden State have vowed to protect the once-controversial, now highly popular program. (Federal lawmakers, including several from New Jersey, are also seeking to expand these protections.)

‘More options’ for New Jerseyans

Sen. Nellie Pou (D-Passaic)
“The ACA was monumental legislation and expanded coverage for thousands of New Jerseyans,” said Sen. Nellie Pou (D-Passaic), a lead sponsor of several of the bills and chair of the commerce committee. “Everyone deserves the right to affordable healthcare and codifying this federal law into state law will help give New Jerseyans more options and greater coverage for years to come, regardless of who is in charge of the Oval Office.”

Most of the attention in the hearings was focused on the legislation to create the exchange and impose the controversial fee (S-49/A-5499), sponsored by Pou, Vitale, and Sen. Nia Gill (D-Essex), and Assembly members Herb Conaway (D-Burlington), John McKeon (D-Union) and Nancy Pinkin (D-Middlesex). Other bills approved last week would ensure key ACA protections are also enshrined in New Jersey law if the state creates its own exchange; many of these received bipartisan support.

Among other things, these other proposals would enable adult children to remain on their parents’ plans until age 27; ensure breastfeeding, contraceptives and other essential benefits are covered; and guarantee patients with pre-existing conditions could obtain insurance. Most of these elements are already codified in Garden State statute in some form.

While some of the bills will go straight to the floor for a full vote in the Assembly and Senate, many were referred to the appropriations committees in both houses for further review.