On Wednesday evening Governor Phil Murphy signed two bills (
S1877 and
S1878) to stabilize the health insurance market by restoring the federal healthcare mandate and establishing a reinsurance fund. These measures are a necessary response to the Trump administration and Congressional Republicans’ sabotage of the Affordable Care Act, which threatens to increase the number of uninsured New Jerseyans by 300,000 over the next decade.
These bills followed key recommendations made by New Jersey Policy Perspective’s
February testimony to the Senate Commerce Committee.
“The legislation signed by Governor Murphy sends a powerful message to Washington that New Jersey will not allow the Affordable Care Act to be sabotaged,” said Raymond Castro, Director of Health Policy at New Jersey Policy Perspective. “Restoring the individual mandate is essential to keeping healthcare affordable, as it will ensure younger and healthier people obtain insurance and spread the risk in the health insurance pool. Without robust participation of these individuals, insurance premiums will climb and the market could destabilize. The establishment of a reinsurance fund should further reduce premiums by defraying the cost of providing health coverage for very sick individuals. These policies should stabilize New Jersey’s healthcare market and further the state’s progress in reducing the uninsured and keeping premiums affordable.”
If the individual mandate was not restored, NJPP estimated that the number of uninsured in New Jersey would have increased by up to 300,000 over the next decade; premiums would rise about 10 percent; the state would have lost billions in federal Medicaid funds and premium subsidies; and taxpayers would have been hit with a much bigger bill for charity care payments to hospitals.
This new law will mainly help 150,000 middle class New Jerseyans who purchase their insurance directly with insurers because they are not eligible for federal subsidies under the ACA and must pay for the full cost themselves.
We estimate their premiums would have gone up about $76 million next year compared to last year without the mandate which would represent a $1,800 increase for a family of four and nearly $500 for an individual.
In anticipation that the mandate would be repealed, insurers already increased premiums this year. Currently a four-person family is typically paying about $23,000 a year and when the maximum out of-pocket costs are added, the total cost is up to $37,700 which is simply unaffordable for most families.
Tax payers will benefit because fewer New Jerseyans will decide that it makes more sense for them to skip insurance and instead just go to an emergency room when they get really sick which drives up charity care costs at public expense. Over $400 million in charity care savings is achieved every year in New Jersey because of the ACA.Also, without an individual mandate it was expected that many employers would decide to not provide health coverage because it would no longer be required for their employees.
The new law 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. That was added to prevent short term and association plans, sometimes called “junk plans,” from being sold in New Jersey which are being pushed by the Trump administration to circumvent the ACA.
The current federal penalties are $695 per adult and $347 per child or 2.5 percent of family income, whichever is greater.
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