Second state to enact individual health insurance

New Jersey will become second state to enact individual health insurance mandate

By KATIE JENNINGS

Gov. Phil Murphy on Wednesday signed into law a bill that will require all New Jersey residents to have health coverage or pay a penalty, making the state the second in the country to enact an individual health insurance mandate.

Democratic lawmakers drafted the bill, NJ A3380 (18R), in response to Congress’ decision to repeal the federal mandate established under the Affordable Care Act. The repeal, the New Jersey lawmakers feared, would drive healthier people out of the state’s Obamacare market and cause premiums to spike.

"The individual market would descend into a death spiral if not for this legislation," said state Sen. Joe Vitale (D-Middlesex), the prime sponsor. "This helps to keep people insured and keeps that market healthier."

New Jersey’s mandate is scheduled to take effect Jan. 1, 2019, which gives state officials seven months to get the word out to residents about the new requirement.

Massachusetts was the first state to enact a mandate, which took effect in 2006 and served as a model for the federal provision included in the Affordable Care Act. With more than 97 percent of its residents insured in 2016, Massachusetts had the lowest percentage of people without health insurance in the country.

Vermont Gov. Phil Scott, a Republican, signed a bill on May 28 that would establish an individual mandate, but the details, including the financial penalty and enforcement mechanisms, will be determined during the 2019 legislative session. The Vermont mandate won’t go into effect until Jan. 1, 2020.

In New Jersey, 92 percent of residents were insured in 2016, according to the U.S. Census.

Former Republican Gov. Chris Christie opted to go with a federally facilitated Obamacare exchange. Around 275,000 New Jersey residents signed up for Obamacare plans this year, and more than a half-million residents gained health insurance coverage through Medicaid expansion.

New Jersey’s mandate, which mirrors the former federal requirement, includes an annual penalty of 2.5 percent of a household‘s income or a per-person charge — whichever is higher. The maximum penalty based on household income will be the average yearly premium of a bronze plan. If it’s based on a per-person charge, the maximum household penalty will be $2,085. A “hardship exception” for individuals who cannot afford coverage would be determined by state Treasurer Elizabeth Muoio.

The state expects to collect between $90 million and $100 million in penalties. That money would fund a reinsurance program, which Murphy also signed into law on Wednesday. The cost estimate is based on $93.9 million the Internal Revenue Service collected from the more than 188,500 New Jersey residents who paid the penalty under the federal mandate.

The reinsurance legislation, NJ S1878 (18R), will establish a program to help insurers cover the cost of the most expensive Obamacare patients.

Three insurers offered Obamacare plans in New Jersey this year: Horizon Blue Cross Blue Shield of New Jersey, AmeriHealth New Jersey and Oscar Health.

The state is counting on the federal government to cover around half the cost of the program, which Vitale estimates could cost $275 million.

States can apply for what's known as a 1332 waiver to reallocate federal funds that otherwise would have gone toward Obamacare subsidies. Reinsurance efforts are underway in several states, including Minnesota, Alaska and Oregon, whose 1332 waivers were approved by the Trump administration last year.

The reinsurance program is supposed to reduce the average premium increase by 10 percent to 20 percent.

"The goal is that we mitigate any substantial increase in premiums over the next several years. This will make insurance much more affordable for those who find it difficult, particularly in the individual market," Vitale said.

State Department of Banking and Insurance spokeswoman Trish Graber confirmed the agency awarded a contract for actuarial services to help establish the parameters of the reinsurance program and assist with the 1332 waiver application to secure federal funding. She was not immediately able to provide specifics about the contract.

Even as the Murphy administration and state lawmakers move forward with these Obamacare stabilization efforts, New Jersey’s market has been relatively stable compared with many other states.

“New Jersey’s individual market has great structural bones — a long history of a responsible regulation, strong carrier participation, and a competitive provider market,” said Kathy Hempstead, a senior adviser at the Robert Wood Johnson Foundation.

New Jersey was one of just two markets in the country to gain a new Obamacare insurer in 2018 and had lower-than-average premium increases compared with other federally facilitated marketplaces, according to an analysis by Hempstead.

“With these new protections, it’s hard to imagine a state that will be better prepared to weather the significant obstacles that this market will face nationally in 2019," she said.

The governor’s office did not immediately respond to a request for comment.