New legislation will protect the ACA’s individual mandate in New Jersey, bucking the federal government.
New Jersey Governor Phil Murphy recently signed into law a bill that reinstates the Affordable Care Act’s (ACA) individual mandate for the state’s residents. The law, scheduled to go into effect on January 1, 2019, coincides with the date the federal government will end its requirement that all people carry health insurance — either through the ACA, their employers, or social safety programs like Medicaid.
The Obamacare individual mandate has been a controversial aspect of the law since it was first proposed. Advocates of the provision say that, without it, young, healthier adults will leave the state exchanges and drive up premiums for older individuals who require more consistent medical attention. Opponents contend that it unfairly penalizes those who forego health coverage while inviting the federal government into personal decisions it shouldn’t wade into.
While New Jersey’s move to safeguard the individual mandate is a victory for the ACA’s supporters, it isn’t the only state to take this kind of action. Massachusetts first had a law on the books in 2006, and Vermont’s Governor Phil Scott signed a bill that will go into effect in 2020, making the Green Mountain State the third.
Along with the individual mandate legislation, Governor Murphy also signed a bill to establish the New Jersey Health Premium Security Fund, a reinsurance program partially funded by fees collected from residents who choose not to purchase health insurance. These funds would then be used to help insurers hold down premium costs for the sickest ACA enrollees.
The state projects it will collect $90 million to $100 million in fees, based on a total of $93 million in penalties paid by 189,000 residents in 2015, according to IRS data. The fund, which one lawmaker estimated would run up to $275 million, would also be supplemented by federal funds.
Before it can establish the fund, however, the state’s Department of Banking and Insurance must receive approval from the federal government. The state also needs to apply to the federal government to allow it to shift the money that would have gone to pay for Obamacare subsidies into the reinsurance program. Minnesota, Alaska, and Oregon have already been approved for waivers that will permit them to set up similar arrangements.
If New Jersey residents choose not to secure coverage, the fees imposed under the new law would be the same as the ACA’s. The maximum tax for a household would equal the average annual bronze plan premium. A per-person penalty will be set at a maximum of $2,085, although individuals unable to pay for coverage can apply for a hardship exemption.
A Stable ACA in New Jersey
Compared to other states that have been struggling with insurers exiting state exchanges and growing premiums, New Jersey’s health insurance marketplace has kept costs low — and even attracted a new provider. Indeed, a study by the Robert Wood Johnson Foundation reports the state’s lowest-priced bronze plan came in at $264, below the Northeast regional average of $286. In 2018, Oscar Health re-entered the state exchange, joining Horizon Blue Cross Blue Shield of New Jersey and AmeriHealth New Jersey. Now, some 275,000 people in the state are covered under the ACA exchanges.
For insurance agents, New Jersey’s individual mandate underscores the need to stay up to date on the latest developments in the industry. After all, other states may follow Massachusetts, New Jersey, and Vermont in stabilizing their own ACA markets independent of the current Administration. Accordingly, research your state’s healthcare insurance laws and talk to your clients about their specific needs. They’ll appreciate you taking the time to ensure that they’re well-informed and abreast of the most recent changes in the marketplace.