NJ To Use Federal, State Dollars To Reimburse Insurance Companies

TRENTON - New Jersey residents who purchase their health insurance on the individual market could pay significantly less next year now that the state has received the go-ahead to create a reinsurance program to help cover high-risk residents and their costliest claims.

The New Jersey Department of Banking and Insurance announced Thursday that the state's Section 1332 State Innovation Waiver to create a reinsurance program received federal approval in time to impact the price of next year's insurance premiums before open enrollment begins this fall.

Under the planned program, the state will use a mix of federal and state dollars to reimburse insurance companies for a portion of expensive claims. Doing so reduces those companies costs and risk and allows them to charge less for premiums.

The department expects New Jersey's program will reduce premiums next year by about 15 percent compared to what the cost would be without the new program in place.

The state has requested $218 million in federal pass-through money to help fund the program in 2019. Another $100 million for the program is expected to come from revenues generated from the state's new penalty on residents who fail to obtain adequate health coverage.

Legislation authorizing the creation of the reinsurance program and the penalty were signed into law in May by Gov. Phil Murphy, who said creating the penalty was key to preventing insurance costs from skyrocketing in the wake of the federal tax overhaul, which eliminated the federal mandate that most residents must obtain adequate health coverage.

He said creating the reinsurance program was another step the state could take to try to ensure residents have access to affordable coverage.

"Health care is a right, not a privilege, and we are working to ensure that all New Jersey families have access to affordable quality coverage," Murphy said in a statement. "This program is a significant step in our effort to link families to the health care access they need. We are committed to continuing our work to make sure that as many New Jerseyans as possible enroll in coverage and get the care that is so critical to their health and well-being."

New Jersey insurers have already submitted their proposed premiums for individual market insurance plans for the upcoming year. The cost of those plans were to increase on average about 6 percent, according to the department.

Horizon Blue Cross Blue Shield of New Jersey, which is the state's largest health insurer, asked for approval for a 9.2 percent average increase for its exclusive provider plans and a 0.3 percent average increase for its HMO plans.

AmeriHealth is seeking on average a 0.8 percent increase for its exclusive provider plans and a 1.4 percent increase for its HMOs.

The state is still reviewing the proposed plans and prices and the approval of the waiver. The department expects the premium prices will decrease significantly due to the reinsurance program and could likely cause some plans to cost less than the previous year.

State Sen. Troy Singleton, D-7th of Palmyra, who was one of the primary sponsors of the legislation authorizing the reinsurance program's creation, said it would help insulate the state against actions by some Republicans in Washington to undermine the Affordable Care Act.

"As one of the primary authors of the legislative initiative that led to this approval, this is wonderful news," the senator said Friday. "The reinsurance program granted by this waiver will help to insulate New Jersey residents against the willful actions by some in Washington to purposely sabotage the Affordable Care Act and drastically increase the cost of health care in our state."

The individual plans are sold on the federal marketplace created by the Affordable Care Act. Open enrollment is scheduled to start Nov. 1.

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.