By Linda Schwimmer
New Jersey requires those who can afford health insurance to purchase coverage. For those who need help paying for coverage, there is free and subsidized health insurance. And if you still can’t afford coverage because of financial hardship, you are not penalized.
Indeed, our state legislators and Gov. Phil Murphy have crafted thoughtful policies to strengthen the Affordable Care Act so more people could get covered.
Unfortunately, legislation now advancing would throw a wrench into a key element of the very successful policies that have resulted in lower premiums and more New Jersey residents getting health insurance.
To encourage as many New Jerseyans to obtain coverage as possible, the law includes a penalty for those who chose not to obtain coverage. To account for hardships, including economic setbacks, the existing law contains 12 exemptions that waive the penalty.
With Assembly Bill 4807, lawmakers are proposing a new exemption that is not tied to the ability to pay. The intent may be well-meaning during the pandemic but the repercussions would be harmful.
The mandate was designed with the understanding that when everyone gets insurance, whether they think they will need it or not, the risk is spread among more people, which lowers overall premiums. Lower premiums enable more people to afford insurance, creating a virtuous cycle.
The opposite is true when people only buy insurance when they know they will need health care. That’s called “adverse selection,” which creates a premium “death spiral” in the market. Rates go up and eventually no one can afford insurance.
The mandate and penalty began with the federal Affordable Care Act. After former President Donald Trump and Congress eliminated the federal insurance mandate penalty, New Jersey lawmakers and Gov. Murphy — recognizing its importance — created a state-based mandate and penalty.
This bill would, unwittingly, undermine the existing marketplace. It broadens the existing economic hardship exemptions to allow anyone who has received unemployment or lost at least half of their income during the pandemic to avoid the penalty for not having health insurance, regardless of the person’s remaining income or financial status.
By creating a blanket exception that is not tied to a person’s ability to pay for health insurance, this bill would enable people who have the economic means to obtain health insurance to forgo coverage without any consequence. We don’t want to create unnecessary, non-financial-based excuses for people to not even shop for insurance.
The bill may have been introduced out of concern for the many New Jerseyans who have been economically harmed during the pandemic. But it would mean more people who could afford health insurance would forgo coverage — increasing costs for all those who remain in the market.
The adverse selection that would result from the passage of this bill would harm our health insurance market at exactly the wrong time. The insurance covers everything from hospital care to prescription drugs, COVID-19 tests and immunizations. We are in the middle of a pandemic; people need coverage.
When it comes to health insurance, this is not the time to normalize or encourage people to go without health insurance. Rather, we should incentivize people who lost their jobs and, subsequently, their health insurance, to explore their health insurance options. They may be surprised about what they are eligible for.
New Jersey last year launched its own health insurance marketplace called GetCoveredNJ. Gov. Murphy extended the open enrollment period because of the pandemic. Even now, residents can still purchase subsidized insurance on the marketplace. They can also determine if they qualify for NJ FamilyCare, which is free. There is no enrollment deadline for that insurance. Since November of last year to the end of last month, 269,560 state residents signed up for health insurance under GetCoveredNJ.
We need to promote the benefits of having health insurance and make it more affordable, not create pathways for people to avoid coverage. We are not telling drivers that they don’t need car insurance or doctors that they can skip malpractice insurance. We know the negative consequences under either scenario.
The same is true here. We want a healthy state with everyone insured. We have free and subsidized insurance. The state added more subsidies this year and expanded the enrollment period. Assembly Bill 4807 may look like a kind gesture of help but the measure is dangerous. It undercuts our health insurance system in the middle of a pandemic and must be rejected.
Linda Schwimmer is president and CEO of the New Jersey Health Care Quality Institute.