LEGISLATIVE FISCAL ESTIMATE
[Second Reprint]
ASSEMBLY, No. 2171
STATE OF NEW JERSEY
215th LEGISLATURE
DATED: APRIL 17, 2012
SUMMARY
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Synopsis: |
“New Jersey Health Benefits Exchange Act.” |
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Type of Impact: |
Increased administrative expenses of, and regulatory fee revenue for, the Department of Banking and Insurance. |
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Agencies Affected: |
Departments of Banking and Insurance and Human Services |
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Fiscal Impact |
Year 1 to Year 3 |
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State Cost |
Indeterminate Annual Increase – See comments below |
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State Revenue |
Indeterminate Annual Increase – See comments below |
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· In response to the federal health care reform law, the bill creates a Statewide health insurance exchange as an independent entity, allocated within the Department of Banking and Insurance, to facilitate the purchase of health care coverage under qualified health benefits plans certified by the exchange, and authorizes the board of the exchange to establish a Basic Health Plan (BHP) in conjunction with the Department of Human Services for persons who are not eligible for other publicly funded health care coverage.
· The Office of Legislative Services (OLS) concludes that the creation of the exchange will have two principal fiscal impacts: an indeterminate but significant increase in State operational costs; and an increase of an approximately similar amount in State revenues. The fiscal impact of the bill will depend on the expenses of the exchange, but it is uncertain at this time what those expenses will be. Regardless of the amount of expenses, the costs of the bill will likely be offset by increased revenue, as section 9 of the bill authorizes certain surcharges and assessments on qualified health benefits plans and health insurance carriers as necessary to support the activities of the exchange.
· The bill also requires the exchange board to take actions to create and offer a BHP to certain individuals who do not qualify for Medicare, Medicaid, or the NJ FamilyCare program. It is not possible at this time to determine the costs of establishing and operating a State BHP due to uncertainty as to the details of the program and reimbursement for the administrative costs of the program. It does appear that the State will receive federal funding equal to 95 percent of the estimated federal cost for BHP enrollees, if these enrollees had received federal tax credits and subsidies for out-of-pocket costs in the exchange. It is uncertain if these federal dollars, along with member premiums and cost sharing, will fall below, meet, or exceed the costs incurred by the State in providing a BHP to enrollees.
· The bill provides that the five public members of the board are to serve on a part-time basis and receive an annual salary of $50,000, in addition to any expenses incurred in the performance of their duties. This will cost, at a minimum, $250,000 a year for salaries.
· The federal health care reform law provides a process for states to obtain funding for purposes of implementing and establishing an exchange. The State of New Jersey received $1 million in federal FY2011 and almost $7.7 million in federal FY 2012 from the federal government to be used for planning purposes for creating the exchange.
BILL DESCRIPTION
Assembly Bill No. 2171 (2R) of 2012, designated as the “New Jersey Health Benefit Exchange Act,” creates a Statewide health insurance exchange pursuant to the federal requirements of the “Patient Protection and Affordable Care Act,” Pub.L.111-148, as amended by the “Health Care and Education Reconciliation Act of 2010,” Pub.L.111-152 (hereafter referred to as “the federal act”). The bill establishes the New Jersey Health Benefit Exchange in the Executive Branch of State Government. The exchange is allocated within the Department of Banking and Insurance, but is to be independent of any supervision or control by the department.
The exchange is to be governed by a board of directors. The board shall facilitate the purchase by individual and small businesses of coverage under health benefits plans certified and offered through the exchange at affordable prices. Consistent with the requirements of the federal act, the board shall establish procedures for the operation of the exchange, including procedures related to certifying plans to be offered through the exchange.
The board is also charged with marketing and publicizing the availability of health care coverage and federal subsidies through the exchange. The board must also establish a navigator program, in accordance with the federal law, under which an entity chosen by the exchange as a navigator shall conduct certain public education activities to raise awareness of, and facilitate enrollment in, qualified health benefits plans offered through the exchange.
The board is to appoint an executive director of the exchange to manage the operations of the exchange. The executive director may, with the approval of the board, employ professional and clerical staff as necessary to implement the provisions of the bill. The board is to also establish an advisory committee, which includes representatives from various stakeholders, to provide advice to the board concerning the operation of the exchange. The chair of the advisory committee is to serve on the board of the exchange.
The board will also establish the “State Business Health Options Program” (SHOP) to assist participating employers in facilitating enrollment of their employees in qualified health benefits plans.
The board is also required to take action to create and offer a Basic Health Plan, or “BHP,” in conjunction with the Department of Human Services and consistent with the provisions of the federal act, to enable persons, under age 65, with incomes of between 133 percent and 200 percent of the federal poverty level, and noncitizens who would be eligible for Medicaid except for not meeting the minimum residency requirements provided in federal law, and who would otherwise be eligible to receive premium subsidies for the purchase of coverage through the exchange, to purchase essential health benefits.
The exchange may apply a uniform surcharge to all qualified health benefits plans (those plans that are certified by the exchange), and a uniform assessment on carriers that do not contract with the exchange, as the board may determine necessary to effectuate the purposes of the bill. A nonlapsing revolving fund, to be known as the “New Jersey Health Benefit Exchange Trust Fund,” is to be established in the Department of the Treasury, to be the repository for monies collected as the surcharges and assessments provided for in the bill and other monies received as grants or otherwise appropriated for the purposes of the exchange. All monies deposited in the fund are to be used only to pay for administrative and operational expenses that the exchange incurs in order to carry out its responsibilities.
The State Treasurer is the custodian of the fund and all monies in the fund must be invested and reinvested by the Director of the Division of Investment in the Department of the Treasury as are other funds in the custody of the State Treasurer, and interest received on the monies in the funds must be credited to the fund.
The bill provides that the board must take the action necessary to ensure that health benefits plans are offered through the exchange not later than January 1, 2014. The bill also provides that the Commissioner of Banking and Insurance is to report to the Governor and the Legislature, no later than January 1, 2018, on the commissioner’s findings and recommendations concerning whether to continue, revise, or phase out the existing New Jersey Individual Health Coverage Program and New Jersey Small Employer Health Benefits Program, as provided under current law.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that Assembly Bill No. 2171 (2R) will have two principal fiscal impacts: an indeterminate but significant increase in State operational costs; and an increase of an approximately similar amount in State revenues.
The fiscal impact of the bill primarily depends on the expenses of the exchange that could be authorized by the board pursuant to the bill’s provisions. However, without input from the Department of Banking and Insurance, the majority of the cost of the administrative and operational expenses of the exchange is uncertain at this time. The bill does provide that the five public members of the board are to serve on a part-time basis and receive an annual salary of $50,000, in addition to any expenses incurred in the performance of their duties. This will cost, at a minimum, $250,000 a year for salaries.
Additionally, the bill requires the board to take action to create and offer a BHP. It is not possible at this time to determine the costs of establishing and operating a BHP due to uncertainty on the details of the program, including, federal reimbursement of State costs related to administering the BHP, and the extent to which member premiums and cost sharing and the surcharge or assessment on carriers will cover the costs of the BHP. It does appear that the State will receive federal revenue equal to 95 percent of what the federal government would have spent on BHP enrollees, if these enrollees had received federal tax credits and subsidies for out of pocket costs in the exchange. It is uncertain if these federal dollars, along with member premiums and cost sharing, will fall below, meet or exceed the costs incurred by the State in providing BHP coverage to enrollees.
Regardless of the amount of expenses related to the bill, the costs will likely be offset by equivalent additional revenue, as the bill authorizes a uniform surcharge to all qualified health benefits plans (those plans that are certified to be offered through the exchange) and a uniform assessment on carriers that do not contract with the exchange, to the extent necessary to support the activities of the exchange.
Additionally, the federal act contains certain provisions pertaining to funding available to states for purposes of implementing an exchange. The State of New Jersey received $1 million in federal FY 2011 and almost $7.7 million in an “Exchange Establishment” grant in federal FY 2012 from the federal government to be used for planning purposes for creating the exchange. The federal act states that funding available to the states will be discontinued by January 1, 2015, at which time states must identify funding sources to ensure their exchanges are self-sustaining, through assessments on participating health insurers, user fees, or otherwise.
The extent to which the grants received by the State in 2011 and 2012, and any subsequent grants received by the State, will offset actual costs of establishing or operating the exchange cannot be determined without further information. However, these grants may not be the conclusion of federal funding for the establishment of the exchange. Guidance from the Centers for Medicare and Medicaid Services in the United States Department of Health and Human Services indicates that the federal government plans to continue to award Exchange Establishment grants through 2014 to give “states maximum flexibility and ensure that states can move forward on their own timetables as they work to build an Exchange.”
The OLS selectively reviewed other states’ activities directed at establishing exchanges. However, due to the wide variety of permissible approaches to exchange design under the federal act, and variations in conditions in insurance markets in other states, data are not available from other states’ efforts in a format that could be used to extrapolate cost estimates applicable to the exchange created in New Jersey under Assembly Bill No. 2171 (2R).
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Section: |
Commerce, Labor and Industry |
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Analyst: |
Senior Fiscal Analyst |
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Approved: |
David J. Rosen Legislative Budget and Finance Officer |
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).