Gov. Phil Murphy Signs Bills Designed To Stave Off Insurance Premium Increases

The bill will create a so-called “individual mandate” in the state, and a companion measure will require the state Department of Banking and Insurance to create a reinsurance program intended to help stabilize rising insurance premiums by covering some of the expense of insuring high-cost residents.

TRENTON — Starting next year, most New Jersey residents will be required to have health insurance coverage or risk being assessed a penalty under state legislation signed into law by Gov. Phil Murphy.

Murphy signed into law Wednesday both a bill creating a so-called “individual mandate” in the state, as well as a companion measure requiring the state Department of Banking and Insurance to create a reinsurance program intended to help stabilize rising insurance premiums by covering some of the expense of insuring high-cost residents.

Both measures were sponsored by Sens. Troy Singleton, D-7th of Palmyra; and Joe Vitale, D-19th of Woodbridge; and Assembly members Herb Conaway, D-7th of Delran; Carol Murphy, D-7th of Mount Laurel; and Pam Lampitt, D-6th of Cherry Hill, in response to the loss of the federal government’s tax penalty on residents who don’t carry insurance.

The penalty is scheduled to be eliminated in January as part of the tax overhaul law signed by President Donald Trump in December.

Murphy’s administration had warned that the loss of the federal mandate and Congress’ failure to reach an agreement to provide funding for cost-sharing subsidies reimbursing insurers for mandated reductions in copays and deductibles for certain low- and moderate-income residents threaten to cause premiums sold on the federal health care exchange to rapidly rise as much as 90 percent over the next three years.

The two bills Murphy signed are intended to blunt those increases. The first measure, known as the New Jersey Health Insurance Market Preservation Act would create an individual insurance mandate for state residents, essentially adopting the same rules and penalty of the Affordable Care Act.

In 2015, about 188,750 New Jerseyans were subject to the penalty payment and paid about $93.3 million, according to IRS data included in an Office of Legislative Services fiscal note on the measure.

Under the New Jersey measure, those penalties would help fund a reinsurance program created by the second measure Murphy signed, known as the New Jersey Health Insurance Premium Act, which requires the state to establish a reinsurance program that would help insurers in the state cover high-risk residents and their costliest claims.

At least half of the projected $280 million cost for the reinsurance program is expected to be paid by the federal government and the law requires the administration to seek a waiver from the federal government to implement the program. Another $100 million is expected to come from revenues generated from the new penalty on residents who fail to obtain adequate health coverage.

Singleton and Vitale said fast implementation of both laws is needed since insurers will begin seeking approval for premium costs before open enrollment begins for individuals who purchase insurance on the Affordable Care Act’s federal exchange.

“Protecting the viability of the individual mandate is needed to maintain a foundation for the insurance market and to allow the success of the ACA to continue,” said Vitale, the chairman of the Senate Health, Human Services and Senior Citizens Committee. “New Jersey has benefited from the health care law and we want to see that those benefits continue. It has made health care more affordable and more accessible, especially for those in need.”

“The federal tax law recently adopted by President Trump included the upcoming repeal of the individual mandate,” Singleton added. “The consequences of that decision 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.”

About 275,000 New Jerseyans obtained coverage through the ACA’s exchange this year, down from 295,000 who signed up for coverage last year.

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