New Jersey Gov. Phil Murphy signed legislation on May 30 that will reimpose the mandate all residents enroll in a “qualifying” health insurance plan or else pay a penalty. The national individual mandate penalty was effectively eliminated in December when the Republican-led Congress passed the Tax Cuts and Jobs Act.
When the law goes into effect on January 1, 2019, any New Jerseyan without insurance will be required to pay a $695 penalty or 2.5 percent of his or her household income, whichever is higher. The maximum household penalty will be the average annual premium for a Bronze Plan, or, if a per-person penalty is applied, $2,085.
{mosads}The $90 million to $100 million in expected revenue from the penalty will be used to fund a reinsurance program in the state, also approved by Murphy on May 30.
New Jersey is only the second state to create its own individual health insurance mandate, but nine other states and the District of Columbia also considered bills earlier in 2018 that would reinstate a penalty for not being enrolled in a health insurance plan.
Murphy and New Jersey legislators who support the law insist bolstering the failing ObamaCare insurance scheme will give the people of their state greater health care access, but what they have failed to tell their constituents is that lower- and middle-income Americans are disproportionately harmed by the mandate’s penalty.
According to an IRS report, in 2015, the most recent year for which data are available, more than six million families paid the individual mandate penalty nationwide, including 188,570 filers in New Jersey. Among the New Jerseyans responsible for making payments, nearly 70,000 had adjusted gross incomes between $10,000 and $25,000, and 76,000 had AGI incomes between $25,000 and $50,000 — together accounting for 77 percent of all those who paid the penalty in the state.
The purpose of the health insurance requirement is to force uninsured consumers into ObamaCare exchanges, where costs have skyrocketed in recent years. The average insurance premium paid in 2018 by a 40-year-old enrolled in a Silver Plan — the benchmark ACA plan — increased by 31 percent from 2017 to 2018 and is currently $536. The average deductible in 2018 for families enrolled in a Silver Plan also increased and is now greater than $8,200, while the average maximum out-of-pocket expenses for families exceed $13,700.
With costs this high, it’s unsurprising health insurance has become so expensive that many Americans can no longer afford to use it. A recent survey by the West Health Institute and NORC at the University of Chicago found 44 percent of those surveyed said despite being sick or injured, they chose within the past 12 months not to see a doctor on at least one occasion because their health insurance costs were too high. This is a remarkable increase from the findings produced in similar polls in recent years. For instance, a 2014 survey by NORC and the Associated Press found only 19 percent of privately insured Americans had chosen not to see a physician while ill.
Making matters even worse, New Jersey forbids short-term health insurance plans, which are significantly more affordable than plans sold on ACA exchanges, because they don’t include many of the costly essential health benefits mandated by federal law. In February, the Trump administration announced it plans to permit insurers to offer short-term plans that don’t expire for 12 months, a significant upgrade from the current three-month limit now in place. But because New Jersey policymakers refuse to allow the sale of these plans, lower-income New Jerseyans who don’t qualify for Medicaid are left with virtually no alternatives to high-cost ObamaCare plans.
Forcing people to purchase health insurance plans they can’t afford to use isn’t just bad public policy, it’s a cruel assault on working-class Americans, many of whom live paycheck to paycheck. Other state legislators should avoid these heartless, ineffective policies and instead focus on promoting market-based health care solutions that increase competition among health insurers and provide greater options for consumers, such as permitting insurers to sell plans across state lines, eliminating essential health benefits mandates, and greatly expanding tax-free health savings accounts.
Justin Haskins is executive editor and a research fellow at The Heartland Institute, a nonprofit group focused on promoting limited government. Arianna Wilkerson is the group’s government relations coordinator.