New Jersey took a major step forward in protecting health care coverage for state residents on June 28, when Governor Phil Murphy signed a law authorizing the creation of New Jersey’s own health exchange.
Only 11 states, including New York and California, plus the District of Columbia, currently have their own exchanges, which are used by individuals and small employers to purchase government regulated and standardized health insurance policies under the Affordable Care Act (ACA), commonly known as Obamacare.
The rest of the states, including New Jersey, either use the federal exchange–healthcare.gov (17 states), have a state-federal partnership marketplace (17 states) or a state-based one that uses the federal platform (5 states).
Every state had the option to set up its own exchange when the ACA, enacted in 2010, was first implemented in 2013, and it was anticipated that most states would do so. But NJ’s then-Governor, Chris Christie, in 2012 vetoed legislation that would have established a state exchange. Most other Republican-ruled states similarly opted to utilize the exchange set up by the federal government rather than operate their own.
The new law, P.L. 2019, c. 141, authorizes the Department of Banking and Insurance (DOBI) to establish and operate a state-based exchange and to coordinate its operations with those of the New Jersey Individual Health Coverage Small Employer Health Benefits Programs. That means that starting in the fall of 2020, New Jersey will provide the infrastructure, the website, and the customer support for those seeking to purchase health coverage for the 2021 calendar year.
Timing was an issue because in order for the exchange to be up and running by then, New Jersey must submit an application to the federal Center for Medicare and Medicaid Services by August 1. If the bill had not passed when it did, before the Legislature went on its summer recess—from which it is not expected to return until November, after the fall elections—that deadline would have been missed and the exchange pushed back a full year.
In March, Governor Murphy sent the CMS a Declaration Letter notifying it of New Jersey’s intent to set up a state based exchange to be operational for the 2021 plan year.
But only one day before final passage, the state exchange bill, A-5499, looked like it would miss the deadline to be up and running by the 2020 enrollment period. The Assembly had passed it on June 20 but State Senate President Stephen Sweeney (D-Camden) was refusing to post it for a floor vote. Sweeney said the bill needed to be amended first so that it encompassed Medicaid recipients too. The bill’s backers said the change was not needed and that any state exchange that was set up was necessarily going to provide health care access to Medicaid recipients.
Nevertheless, the bill wound up passing the Senate on June 27 after the Medicaid language was added on the Senate floor by way of an emergency resolution, following which it went back to the Assembly that same day for a vote on the amended version. Delay averted.
The advantages of a state-run exchange are manifold. It will give New Jersey greater control over the policies offered and how they are marketed, advertised and sold, and provide the state with ready access to data that will enable it to better regulate the market, target outreach and inform health care policy decisions. If the federal government waters down the ACA criteria, by, for example, no longer requiring that certain illnesses or conditions be covered, New Jersey will be able to continue requiring that coverage for policies sold on its own exchange.
In addition, NJ now pays roughly $50 million per year to use of the federal exchange, with the money coming from a monthly assessment against insurers set at 3.5% of premiums. To the extent those funds exceed the costs for operating the state exchange, they can now be used for other purposes. The bill makes the funds available not just for supporting the exchange but for “any efforts that can increase market stabilization and that may result in a net benefit to policyholders.”
But the chief impetus for the legislation is that having its own exchange will enable New Jersey to shield the state marketplace from the ongoing efforts by Trump and the GOP to sabotage the ACA. In an announcement last March about the plan to transition to a state exchange, DOBI Commissioner Marlene Caride referenced that reality, stating “because we are operating on the federal exchange, we are subject to the whims of the Trump administration and directly impacted by its efforts to damage and destabilize the market.”
On top of repeated efforts to dismantle the ACA by repealing it outright or striking it down in court, the Trump administration and GOP have ceaselessly chipped away at it by reducing federal subsidies; cutting in half, from 90 to 45 days, the annual fall enrollment period; and slashing the funding allocated for outreach, advertising and enrollment assistance. I have written about some of those efforts in previous blog posts.
With a state exchange, the full 90-day enrollment period would be restored and money no longer paid for use of the federal exchange could be used for outreach, advertising and enrollment assistance.
States with their own exchanges have done better than those utilizing the federal marketplace at least in withstanding efforts to destabilize the ACA in those states, as the Washington Post has reported.
A study released in 2017 by the nonprofit Commonwealth Fund, found that state exchanges were also more profitable for insurers which it attributed it to such factors as: state exchanges’ greater efforts to publicize themselves and generate more enrollment, which may have resulted in a more balanced risk pool; political cultures that were more supportive of the ACA in general; and more accurate actuarial projections.
The state exchange law is not NJ’s first attempt to bolster the ACA through legislation. In May 2018, Murphy signed two bills meant to keep the ACA viable by stabilizing premiums. The Health Market Preservation Act, P.L. 2018, c. 31, created a state mandate to purchase health insurance in response to Congress’ de facto repeal of the federal mandate (by reducing the penalty for not being insured to $0). The mandate helps keep premiums down by requiring younger, healthier people to be part of the risk pool and not just the old and sick.
The other measure already adopted by New Jersey, the Health Insurance Premium Security Act, P.L. 2018, c. 24, established a reinsurance program, to help insurers cover claims that exceed an annual threshold up to a certain maximum amount to be set each year. The reinsurance is funded by assessments on carriers, appropriations from the general fund and penalties paid by those who fail to comply with the state mandate.
Those efforts paid off, as I discussed in a blog post last November. 2019 ACA monthly premiums for New Jersey fell to $352 from $413 in 2018. They also decreased relative to other states—which mostly saw increases—with New Jersey dropping from 9th highest in the country to 47th.
At least four other states—Pennsylvania, Oregon, Nevada and New Mexico—are also moving to set up their own exchanges, according to a June 28, 2019 report from the Commonwealth Fund. The report attributes the renewed interest in state exchanges to the federal one’s poor management, and increased user fees, and the budget cuts for enrollment along with “improved technology options and other incentives.”
A number of other bills are meant to facilitate the operation of NJ’s state exchange. Introduced as part of the same package of legislation, they lack the same time sensitivity and did not necessitate a similar 11th hour push. They are:
It establishes a process parallel to the one for the federal exchange, by which NJ can review rate increases for health insurance policies to be sold on its state exchange according to criteria that identify “unreasonable” rate increases, and require health insurance carriers to provide justifications for them. It passed the Assembly 58-20 on June 20 but awaits a hearing in the Senate Budget and Appropriations Committee.
It requires continuation of health benefits for dependents until they reach age 26 as under the ACA. It passed the Assembly 73-0 on June 20 but awaits a hearing in the Senate Budget and Appropriations Committee.
It revises the statutory definition of “small employer” under the New Jersey Small Employer Health Benefits Program to conform to the definitions under the ACA. The Assembly bill was reported out of the Assembly Financial Institutions and Insurance Committee on June 6 and referred to the Assembly Appropriations Committee. The Senate counterpart awaits a hearing in the Senate Commerce Committee.
It establishes a limited open enrollment period in the New Jersey Individual Health Coverage Program to be set by the program’s board consistent with federal law, unless the State operates a State-based exchange, in which case the open enrollment period may be set by the exchange. It was approved by the Senate Commerce Committee on June 3 and passed the Assembly 73-0 on June 20. It awaits a vote on the Senate floor.
It would establish a requirement that 85 percent of every premium dollar be expended on the payment of claims, and to the extent that amount falls short, the carrier has to issue a dividend or credit against future premiums for all policyholders sufficient to assure that the aggregate benefits paid plus the amount of the dividends and credits equal 85 percent of premiums. It passed the Assembly 74-0 on June 20. It was approved by the Senate Commerce Committee on June 3 and awaits a hearing in the Senate Budget and Appropriations Committee.
It would bring New Jersey statutes that govern the rating factors used by health insurance carriers to charge premiums for health benefits plans in the individual and small employer markets into compliance with certain provisions of the ACA. It was reported out of the Assembly Financial Institutions and Insurance Committee and the Senate Commerce Committee on June 3 and the Assembly Appropriations Committee on June 13. It awaits a hearing in the Senate Budget and Appropriations Committee.
It repeals a NJ statute which authorizes health insurance carriers to offer “Basic and Essential” health benefits plans in the individual market because such bare bones policies fail to meet ACA standards. It was approved by the Senate Commerce Committee on June 3 and passed the Assembly 53-25 on June 20. It awaits a hearing in the Senate Budget and Appropriations Committee.
It requires health insurers to cover, without copays, certain preventive services: immunizations recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention; “evidence-based items or services that have in effect a rating of ‘A’ or ‘B’ in the current recommendations of the United States Preventive Services Task Force” and other preventive care and screenings for women, infants, children and adolescents provided for in the comprehensive guidelines supported by the Health Resources and Services Administration. It passed the Senate Commerce Committee on June 3 and the Assembly 72-1 on June 20. It awaits a hearing in the Senate Budget and Appropriations Committee.
It expands NJ law beyond ACA requirements by not only prohibiting health insurance carriers and the State health benefits programs from imposing a deductible, coinsurance, copayment, or any other cost-sharing requirement on prescription female contraceptives but also mandating coverage for voluntary sterilization, patient education and counseling on contraception and certain related services. It also removes the exemption in current state law allowing religious employers to deny coverage for female contraceptives if it conflicts with the employer’s bona fide religious beliefs and practices. It passed the Assembly 49-25 on June 20 and awaits a Senate vote.
It requires coverage without copays for breastfeeding support without prescription, prior authorization or referrals and also coverage for breastfeeding equipment. It passed the Assembly 70-1 on June 20 and awaits a Senate vote.
It expands the NJ Law Against Discrimination to apply to health programs and activities and prohibit discrimination on the basis of any class protected under that law, which covers race, creed, color, national origin, national ancestry, age, disability (including perceived disability and HIV or AIDS status), genetic information, sex (including pregnancy), sexual orientation, gender identity or expression, marital status and military service. It cleared the Assembly Financial Institutions and Insurance Committee on June 6, the Assembly Appropriations Committee on June 13 and the Senate Human Services and Senior Services Committee on June 17.
Also related is A-5248/S-562, which requires certain health benefits plans to cover essential health benefits, comprehensively defined under the bill as: ambulatory services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse services; prescription drugs; rehabilitative and habilitative services and devices, laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. The bill further prohibits imposition of lifetime limits on benefits and annual limits on the dollar value of essential benefits. It passed the Assembly 53-23 on June 20 and following June 3 approval in the Senate Commerce Committee, awaits a hearing in the Senate Budget and Appropriations Committee.
NJ Appleseed is a member of the NJ for Health Care Coalition, which has pushed for expanded health care coverage through the ACA and other means and strongly backed the state exchange bill. The Coalition is comprised of community, labor, religious and social justice groups including NJ Citizen Action, AARP-NJ, Anti-Poverty Network of NJ, NJ Policy Perspective, NJ Health Care Quality Institute, National Association of Social Workers-NJ, Planned Parenthood of Greater Northern NJ, Health Professionals and Allied Employees, Communication Workers of America and the NJ Education Association.