Tuesday, March 06, 2018

Getting creamed in New Jersey: Testimony of the unsubsidized

As noted in my last post  (and called for in my January op-ed), a bill introduced in the New Jersey Senate  (S-1877) last month would implement a state individual mandate and earmark the penalty revenue for a state reinsurance program. A companion bill (S-1878) would authorize pursuit of an ACA innovation waiver to seek federal funding for the reinsurance, as Alaska, Oregon and Minnesota* have successfully done.

BlueWaveNJ, a grassroots group for which I volunteer, supports these paired bills. We have lots of members who insure themselves through the individual market -- many subsidized, and many unsubsidized. In support of the bills, we collected testimony from the latter group -- who were slammed by this year's premium increases. Yesterday, I submitted their testimony at a hearing of the state Senate's Budget and Appropriations Committee, which approved amended versions of both bills.

The testimony is posted here, on the BlueWaveNJ website. As the personal narratives indicate:
These are individuals in their fifties and sixties now facing premiums in the $600-1000/month range and family premiums north of $2000.  They describe tough choices between narrow network coverage and still-higher premiums, or between narrow networks and down-sizing to bronze plans that offer basically catastrophic coverage. Subsidized members are faced with a similar choice between ultra-narrow networks and steep premium increases or reduced coverage.
One other point in the testimony I'd like to emphasize here: states can move in two directions to adjust their individual markets, but they really can't stand still:
When the market gets unaffordable enough, people seek alternatives, even if these alternatives limit access to comprehensive care. New Jersey shuts out the alternatives promoted by the Trump administration -- banning short-term policies and tightly regulating association health plans. That's good policy --  but it creates an obligation to foster a market that's affordable to the unsubsidized and offers robust choices to all. An individual mandate paired with reinsurance is the most cost-effective way to do that.
I hope you'll take a look at the tales collected in the testimony.

* Minnesota's did come with a poison pill of sorts -- reduced funding for the state's Basic Health Program.


  1. I have been quite close to the individual market in MN. Not only selling plans, but the employees of Blue Cross speak to us.

    And with that said, I strongly disagree that an individual mandate and reinsurance will create "affordable" policies.

    What they will do is to stop premiums from growing at 20% a year, and you might see some 5% decreases.

    But if your income is $60,000 a year and your unsubsidized policy at age 62 is $15,000 a year -- 25% of your pretax income, worse than that on your after tax income -- then a 5% reduction is not very helpful.

    The only solution is to extend the subsidies to all incomes. The Rand Corp estimates that this would cost $6 billion a year nationwide.

    A rounding error in national health spending!!

    1. I agree with that, absolutely. Say, a 10% of income cap.

  2. 10 per cent of income may be too high, because these percentages are inevitably based on gross income.

    That $60,000 earner in a high tax state and no kids probably has about $3600 a month in net income. If his health insurance premium is capped at $600 a month (10% of gross), it is then in reality 16% of his real income.

    The enormous rise in premiums in nearly all states is due to a combination of guaranteed issue and a weak mandate and shrinking federal reinsurance. If a health plan takes on just one hemophiliac who costs $300,000 a year, they must take on a huge number of healthy no-claims people just to keep premiums level.

    Well, the average age of buyers in the Minnesota individual market is 46. That tells you how many no-claims people are joining up.

    My reaction to your interesting post is that any mandate and reinsurance must be much stronger than most states would contemplate.