Preserving a critical yet controversial part of the Affordable Care Act, Governor Phil Murphy has signed two laws that will make New Jersey the second state to create a statewide individual mandate and use the penalty funds to help further stabilize its health insurance market.Before the 2017 zeroing out of the ACA’s individual mandate, all Americans had to obtain health insurance or pay a penalty for not buying coverage. The intent of the mandate was to ensure that younger and healthier people who might otherwise forgo insurance would buy-in and share costs.
However, the tax package supported by the Republican-led Congress and signed into law by President Trump will discontinue the federal mandate penalty beginning in 2019. The ACA’s individual mandate has long been the most loathed piece of the legislation with opponents claiming that it was coercive and unfair. However, New Jersey Senator Joseph Vitale, (D-Middlesex), one of the leading sponsors of the state legislation, said preserving the mandate "was needed to maintain a foundation for the insurance market and to allow the success of the ACA to continue.” Also a sponsor, state Senator Troy Singleton (D-Burlington) argued that Trump's actions "will usher in an era of higher health insurance costs for everyone and lower health coverage rates. We want to protect New Jersey from the negative impact.”
New Jersey’s new law (S. 1877), to be implemented January 1, 2019, creates a statewide individual mandate similar to the current federal penalty structure. The statue will require all New Jerseyans who don't have health coverage through their employer or a government program like Medicare to buy a policy, or pay a fee at tax time worth 2.5 percent of a household’s income or a per-person charge—whichever is higher. To support this requirement, employers, insurers, and the state Medicaid agency will report, to the state, the months that individuals had coverage. The state will award exemptions to people who have low incomes or unaffordable coverage, are non-resident tax filers, or have other hardships.
The second law (S. 1878) requires that the funds collected from the penalties paid by the uninsured be deposited into the New Jersey Health Insurance Premium Fund. The fund, essentially a reinsurance program, will help pay the claims of people who are catastrophically ill, so rates do not dramatically rise. However, establishment of the reinsurance program is contingent on federal approval of an ACA state innovation waiver, better known as a Section 1332 waiver.
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.
In 2015, 189,000 New Jerseyans collectively paid $93 million, or roughly $500 each in fees, rather than comply with the individual mandate, according to IRS data garnered by the research institute, New Jersey Policy Perspective.
Vermont also recently enacted a law to create an individual mandate, although it will not take effect until January 2020. Signed by Republican Governor Phil Scott on May 28, VT H696 (17R) will not be implemented until 2020 because state legislators have not decided on the penalty amount for people who forgo health insurance. The bill states that the penalty will be determined during the 2019 legislative session, after considering the analysis of a working group.Governor Murphy signed both of the New Jersey bills on May 30th, the same day the consumer advocacy group, the NJ for Healthcare Coalition sent him a letter urging him to make a decision without further delay. The letter reads, "We urge you to act to preserve the coverage gains we've made under the ACA and to make comprehensive health insurance affordable for more New Jerseyans by signing these bills.”
Several other states are considering imposing statewide individual mandates. Massachusetts has had its own individual mandate since the 2006 passage under then-Governor Mitt Romney.