Loss of the federal individual health mandate penalty is increasing health insurance premiums all across the country for 2019 enrollment. However, in a bold move, New Jersey has insulated itself from rate hikes by implementing its own individual health benefits mandate to stabilize premium rates. When there is no mandate, healthy individuals are less likely to maintain coverage, which results in a less healthy risk pool, and higher premiums for those who remain insured. Only Vermont and Massachusetts have introduced similar mandates. New Jersey’s mandate, which mirrors the former federal requirement, includes an annual penalty of 2.5% 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 is 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 permitted under appropriate circumstances.
The state expects to collect between $90 million and $100 million in penalties. That money would fund a reinsurance program, implemented by new legislation which Governor Murphy also signed into law this spring. The cost estimate is based on $93.9 million the Internal Revenue Service collected from more than 188,500 New Jersey residents who paid the penalty under the federal mandate.
The reinsurance legislation, “New Jersey Health Insurance Premium Security Act,” was signed into law on May 30, 2018, and is codified at N.J.S.A. 17B:27A-10.1 et seq. The law will create a reinsurance plan to reimburse carriers for certain high-cost claims in the individual health insurance marketplace. The reinsurance plan will apply a combination of federal and state funds to produce individual health insurance premiums ranging from 10-20% lower than they would be without the plan and will help insurers cover the cost of the most expensive Obamacare patients.
States can apply for what is known as a 1332 waiver (https://www.state.nj.us/dobi/division_insurance/section1332/index.html) to reallocate federal funds that otherwise would have gone towards Obamacare subsidies. New Jersey Commissioner of Banking and Insurance, Marlene Caride, has applied for the so-called 1332 Innovation Waiver to implement New Jersey's new law and further stabilize the marketplace. If granted, the Commissioner hopes to reduce premiums in the New Jersey individual health market by 15% and seeks federal funding to help reach this goal. The reinsurance program is supposed to reduce the average premium increase by 10% to 20%.
Governor Murphy also recently signed into law provisions which require healthcare facilities to disclose to patients whether providers are in-network or out of network and provide fee estimates when requested. The law is intended to prevent in-network facilities from using out of network providers at a higher cost to the consumer. The law also calls for mandatory, binding arbitration, and while it does not apply to self-funded plans because ERISA (federal law) preempts state law, the self-funded plan may opt into the New Jersey hidden provider prohibitions on a voluntary basis.
While New Jersey should be applauded for its efforts to contain the cost of healthcare, especially for individuals and small employers, the reform promised by the Obama administration as far back as 2010 remains elusive. Additional areas requiring reform include a viable public health insurance option (the federal concept of state-created CO-OPs failed miserably as nearly all such entities are in liquidation proceedings and no longer enrolling member), prescription drug cost caps, and stronger regulation to assure mandated benefits under applicable state law. Despite these future goals, New Jersey has come a long way in health reform and continues to lead the nation in consumer protections in healthcare.