Gov. Phil Murphy signed a law Friday that imposes a 2.5% tax on health insurance companies that will help pay the premiums for people who rely the marketplace created by the Affordable Care Act to shop for coverage.
Both houses of the state Legislature approved the bill (A4389) Thursday, giving the state ample time to prepare for the ACA open enrollment period that begins Nov. 1.
“As the federal government continues to attack critical provisions of the Affordable Care Act, our administration remains committed to lowering the cost of coverage, expanding access to care, and improving health equity for our most vulnerable,” Murphy said in a statement.
“This action could not come at a more critical juncture, and will directly benefit our uninsured and underinsured populations at a time when many New Jerseyans have lost health coverage as a result of the COVID-19 pandemic.”
The Department of Banking and Insurance would levy a 2.5% tax on insurance companies based on the amount of money collected in premiums. The proceeds — estimated at about $200 million — would be deposited into the Health Insurance Affordability Fund and used to subsidize the cost of insurance for people who earn no more than four times the federal poverty level. A single person earning a maximum of $50,040 and a family of three earning $86,880 would qualify.
An estimated $77 million of the tax money collected will bolster the state’s existing reinsurance program to cover high cost claims and lower premium costs in the individual market.
“This bill will help to ensure that people are able to afford health insurance during this critical time when a global disease is not only threatening their health, but their financial security in unimaginable ways,” said Joseph Vitale (D-Middlesex) one of the bill’s prime sponsors.
The legislation passed along party lines in both houses, with zero “yes” votes from Republicans.
Business leaders and some health care providers, such as the Home Care & Hospice Association of New Jersey and the New Jersey Dental Association lobbied against it, saying the tax would be passed on to consumers who could hardly afford it.
“The home care and hospice industry cares for a population that requires specialized, intensive, and personalized care,” said Nancy Fitterer, president of the Home Care and Hospice Association of New Jersey. “These patients already face expensive health care costs and simply cannot shoulder another financial burden in our state – and neither can their families and caregivers who support them and rely on affordable coverage to stay healthy themselves.”
The New Jersey Business and Industry Association testified against the bill while it was making its way through committee, arguing it would “increase costs on businesses and nonprofits, large and small, which have continued to offer health benefit plans during the current COVID-19 pandemic while struggling themselves to remain afloat.”
Small group single health insurance premiums paid by businesses with fewer than 50 employees increased by nearly $2,500 between 2008 and 2018, Buteas said. “For those remaining, further cost increases would be devastating and accelerate their exit from the market,” she said.
Supporters of the bill said this was not actually a new tax at all.
Insurers have been paying a federal premiums tax since 2014 to help pay for the landmark health care law, also known as Obamacare. But the federal government will stop collecting this tax in January. Public health and family advocates urged the Murphy administration to impose the tax to expand coverage to a wider swath of uninsured and under-insured residents.
Small employer health benefits plans, dental service corporations, and multiple employer welfare arrangements won’t have to pay the tax, according to the bill.
“With the passage of this bill, New Jersey is solidifying itself as a national leader in protecting the Affordable Care Act and keeping health coverage affordable,” said Brittany Holom, senior policy analyst for New Jersey Policy Perspective, a left-leaning research and advocacy organization. “The Health Insurance Assessment will provide ample resources for New Jersey to expand health coverage, lower the number of people who are uninsured, and address racial disparities in access to care.”
“If the COVID-19 pandemic has taught us anything, it’s that improving access to care will improve public health for all,” Holom said.
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Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio.