Gov. Phil Murphy wants New Jersey to continue to invest in strategies designed to stabilize the health insurance market, improve the quality of the coverage available and better control the associated costs for hundreds of thousands of state residents.
The state budget proposal Murphy outlined Tuesday includes a call for $200 million in annual subsidies to help middle-class New Jerseyans purchase commercial health insurance through the state’s new health insurance “exchange,” which is slated to be operational this fall.
Funding would come from a new state tax on certain health insurance plans that the administration said would essentially replace a federal assessment currently being phased out. Maryland and Delaware are in the process of adopting a similar tax, and several other states are considering the option, according to policy experts.
Murphy’s budget plan — a nearly $41 billion spending plan for fiscal year 2021, which lawmakers must approve by July 1 — also includes funding for the state’s reinsurance program, which he said has helped stabilize the market and hold down premium costs by offsetting the impact of the most costly claims on insurance companies. Some of this will also come from the new insurance tax Murphy called for, although state officials have so far declined to provide any specific figures.
“Our administration took office with a clear and unshakable goal — to grow and strengthen New Jersey’s middle class,” Murphy said during his budget presentation in Trenton, ticking off various gains in education and the economy.
“Nearly a quarter-million residents have been able to purchase affordable, individual health care plans under the Affordable Care Act and, at a time when health care costs are rising across the country, these policies are coming with lower average costs than before our administration took office,” the governor added.
These residents are among the nearly 800,000 New Jerseyans who gained access to insurance through the ACA, which took full effect in 2014, and also improved coverage for nearly two million others. Some 500,000 people qualified for expanded Medicaid coverage under the law; the remainder — who earned too much to qualify for the public program but don’t have coverage through their job — were able to obtain below-market-cost commercial plans through the ACA exchange, or marketplace, most with the help of federal subsidies.
Addressing individual, small-business market
At first, the federal government operated the Garden State’s exchange through the healthcare.gov website that patients used to shop for plans. But in June, Murphy signed a law that made New Jersey the 12th state to take over the operation. Since then, the state has been working to set up a system that will be fully able to handle this individual and small-business market by next fall.
According to the “FY2021 Budget in Brief,” a summary of Murphy’s funding recommendations, the state-based exchange “will give New Jersey greater control over its health insurance market despite Washington DC’s sabotage of the Affordable Care Act.” The law has helped drive New Jersey’s uninsured rate to a record low 9% and significantly expanded coverage among minority residents here and nationwide, studies show.
The insurance exchange is just one element in Murphy’s multipronged strategy to defend, or enhance, the ACA in light of pressure from the Trump administration and national Republican leaders to dismantle the law on the belief that it costs too much and fails to ensure people have access to affordable, quality care.
The governor also instituted an insurance mandate, or tax penalty for those without coverage, designed to increase the pool of people insured and better spread the risk and cost; the mandate — the second to be adopted by a state, after Massachusetts — replaced a federal version that Trump eliminated. Murphy also established the reinsurance fund to help insurance companies plan and control costs and has invested in outreach programs to boost enrollment after federal funding was nearly eliminated, both of which he has pledged to continue.
Combating a dangerous trend
Experts believe these initiatives helped to arrest a dangerous trend in rising health insurance costs in New Jersey. After soaring more than 20%, on average, in 2018, premium cost dropped 9% in 2019; the price of these plans increased again in the current year, but remain below the 2018 threshold. According to a graphic in the “Budget in Brief” document, these changes have saved consumers as much as $150 a month, on average.
In January, Murphy also signed a package of nine bills designed to shore up popular aspects of the ACA — like ensuring those with pre-existing condition can still get coverage and allowing parents to keep kids on their plans up to age 26 — in New Jersey if the federal law is further undermined. These requirements apply to all state-regulated plans, which cover roughly 1.7 million state residents.
The governor also approved legislation in June to fund the exchange itself through a fee of up to 3.5% on premiums for health plans sold on this market, which is expected to bring in $62 million annually; because of the timing of collections, half of this revenue is included in Murphy’s FY2021 budget proposal. (The federal government now assesses $50 million annually to Garden State insurance companies to participate in the healthcare.gov platform, Treasury officials said.)
Legislation will be required to create the new health insurance assessment, which state officials said would go to support the reinsurance program and subsidies for exchange consumers who qualify. The proposal is still being developed, they said, and the impact on Garden State insurance companies is not yet clear. But it would replace a federal health insurance fee that now generates $20 billion annually nationwide to support ACA programs, which is being phased out this year.
The New Jersey version of this insurance tax would need to raise at least $200 million just to fund the subsidy program, however. Details of the state’s subsidy program are also still pending, but under the federal system, consumers with income levels that qualify can receive tax credits to offset the premium costs and, in some cases, monthly support to help cover out-of-pocket expenses.