STATEMENT BY RAYMOND CASTRO, DIRECTOR OF HEALTH POLICY, NEW JERSEY POLICY PERSPECTIVE, ON THE PASSAGE OF S-1877/A-3380 (April 12,2018)

Today’s passage of legislation restoring the individual mandate is essential to keep insurance affordable and sends a powerful message to Washington that New Jersey will not allow the Affordable Care Act to be sabotaged. Despite New Jersey’s progress in reducing the number of uninsured residents, this measure is needed because there are still about 700,000 New Jerseyans without coverage.

“This bill is critically important to stabilizing the health insurance market and will help make sure that insurance coverage remains affordable for as many New Jerseyans as possible,” said Raymond Castro, Director of Health Policy at New Jersey Policy Perspective. “The state still has hundreds of thousands of uninsured residents and it is vital that we do all we can to make sure everyone can secure affordable health insurance and improve public health.”

If New Jersey does not act the consequences will be dire. NJPP estimates that the number of uninsured in New Jersey will increase by about 300,000 over the next decade; premiums will rise about 10 percent; the state will lose billions in federal Medicaid funds and premium subsidies; and taxpayers will be hit with a much bigger bill for charity care payments to hospitals.

Importantly, the revenues collected from the penalties can be used for a reinsurance plan that will decrease the cost of providing health coverage for very sick individuals, thereby further reducing premiums for these families as well as generating federal funds( if a waiver is approved). This bill (S-1878) also passed today.

The penalty should encourage younger, healthier people to obtain insurance, spreading the risk in the health insurance pool. Without robust participation of these individuals, insurance premiums will climb and the market could destabilize.

This bill will mainly help 150,000 middle-class New Jerseyans who purchase their insurance directly since they are not eligible for federal subsidies under the Affordable Care Act and therefore must pay for the full cost themselves. Since premiums already increased this year in anticipation of the repeal of the mandate, these families would save up to $76 million next year by its restoration.

Currently a four-person family must pay about $23,000 a year; when the maximum out of-pocket costs are added, the total cost increases to $37,700, which guarantees that insurance is unaffordable.

Lower-income families will also benefit because the proposed legislation will encourage many uninsured to seek out more-affordable insurance. National research shows most of these individuals are eligible for federal subsidies and that about half are eligible for a plan that costs less than the penalty they may otherwise have to pay. Due to the mandate, over 100,000 New Jerseyans found out they were eligible for Medicaid – which has no cost sharing – when they searched the Marketplace for insurance.

The bill also applies the penalty to anyone who purchased a plan that does not meet the essential benefits requirements in the ACA or New Jersey law. This measure was added to prevent short term and association plans – sometimes called “junk plans” which are being pushed by the Trump administration to circumvent the ACA – from being sold in New Jersey.

For more background on this issue, see NJPP Director of Health Policy Raymond Castro’s report: https://www.njpp.org/healthcare/sabotage-of-the-affordable-care-act-puts-middle-class-new-jerseyans-in-the-crosshairs