SENATE COMMERCE COMMITTEE
STATEMENT TO
SENATE, No. 1877
with committee amendments
STATE OF NEW JERSEY
DATED: FEBRUARY 15, 2018
The Senate Commerce Committee reports favorably and with committee amendments Senate Bill No. 1877.
This amended bill, entitled the “New Jersey Health Insurance Market Preservation Act,” restores, at the State level, the recently repealed shared responsibility tax provided under the Affordable Care Act (ACA), which requires most individuals, other than those who qualify for certain exemptions, to obtain health insurance or pay a penalty. The bill is intended to ensure that health insurance markets in New Jersey remain robust and affordable by ensuring that individuals who can afford to purchase insurance participate in the market.
Specifically, the amended bill requires that every resident taxpayer of the State obtain health insurance coverage that qualifies as minimum essential coverage under the bill. If the taxpayer does not obtain coverage, the bill imposes a State shared responsibility tax equal to a taxpayer’s federal penalty under the ACA prior to the repeal of that provision.
To determine the State shared responsibility tax, the bill largely adopts the rules adopted pursuant to the ACA, with the following changes:
(1) The amount of the tax imposed is determined, if applicable, using the State average premium for bronze-level plans, rather than the national average premium for bronze-level plans;
(2) “Minimum essential coverage” includes, in addition to the types of coverage included under the ACA, the coverage required pursuant to the New Jersey Individual Health Coverage Program;
(3) Instead of the United States Secretary of Health and Human Services, in coordination with the United States Secretary of the Treasury, the Commissioner of Banking and Insurance, in coordination with the State Treasurer, has the authority to recognize additional health benefits coverage as “minimum essential” coverage;
(4) For purposes of the exemption for individuals who cannot afford coverage:
- the threshold to qualify for the exemption shall be calculated based on the lesser amount that the individual would be required to pay for minimum essential coverage under either: (a) an eligible employer-sponsored plan; or (b) a qualified individual health plan;
- the income threshold for coverage to be considered unaffordable shall be determined by the State Treasurer; and
- no tax shall be imposed with respect to any applicable individual for any month during a calendar year if the taxpayer’s gross income for the taxable year is below the State’s minimum taxable income threshold;
(5) No tax shall be imposed with respect to any applicable individual for any month during which the individual is a bona fide resident of another state;
(6) Determinations as to religious conscience or hardship exemptions shall be made by the State Treasurer;
(7) A grandfathered plan shall qualify as minimum essential coverage only if it satisfies the requirements that apply to non-grandfathered plans sold in the market in which the grandfathered plan is sold;
(8) If a taxpayer is subject to both the tax imposed by this bill and the federal penalty, the amount of the taxpayer‘s State income tax is reduced, but not below zero, by the amount of the taxpayer’s federal penalty payment; and
(9) Health coverage provided under a plan obtained through an association, trust, or multiple employer arrangement, including an out-of-State trust or association, shall not qualify as minimum essential coverage unless the plan complies with the requirements of applicable New Jersey law.
Additionally, the tax imposed by the bill is to be assessed and collected in the same manner as under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq.
The State Treasurer will establish a program for determining whether to grant a certification that an individual is entitled to an exemption from either the individual responsibility requirement or the tax by reason of religious conscience or hardship.
The amended bill also provides that any funds collected pursuant to the bill shall be deposited in the New Jersey Health Insurance Premium Security Fund created pursuant to Senate Bill No. 1878 of 2018, which establishes an individual health insurance reinsurance plan.
As amended, the bill also expresses the Legislature’s intent as to the collection of data necessary for the successful implementation of the tax imposed by the bill. The bill provides that the reporting requirement is necessary to protect various compelling State interests.
Accordingly, the amended bill provides that, for purposes of administering the tax on individuals who fail to maintain minimum essential coverage, every applicable entity, including employers and insurers, that provides minimum essential coverage to an individual during a calendar year shall, at such time as the State Treasurer may prescribe, make a return with information about individuals and their coverage. The return is to be in the form the State Treasurer prescribes, and contain the name, address and Social Security number or taxpayer identification number of the primary insured and the name and Social Security number or taxpayer identification number of each other individual obtaining coverage under the policy; the dates during which that individual was covered under minimum essential coverage during the calendar year and such other information as the State Treasurer may require. To minimize the reporting burden, the return may also be in the form of a return under the ACA.
The bill also provides that, not earlier than November 1 nor later than November 30 of each year, the State Treasurer, in consultation with the Commissioner of Banking and Insurance, shall send a notification to each taxpayer who files a gross income tax return indicating if the taxpayer or one of the taxpayer’s dependents is not enrolled in minimum essential coverage as required by this bill. That notification shall contain information on the services available to obtain coverage.
As amended, the bill takes effect on January 1, 2019.
Committee Amendments:
The committee amendments:
- Remove the term “affiliated company” from the definitions;
- Clarify that, for individuals who cannot afford coverage from the requirements in the bill, the threshold to qualify for the exemption shall be calculated based on the lesser amount that the individual would be required to pay for minimum essential coverage under either: (a) an eligible employer-sponsored plan; or (b) a qualified individual health plan;
- Provide that determinations as to religious conscience or hardship under the bill will be made by the State Treasurer;
- Provide that any funds collected pursuant to the bill shall be deposited in the New Jersey Health Insurance Premium Security Fund created pursuant to Senate Bill No. 1878 of 2018, which establishes an individual health insurance reinsurance plan;
- Revise the effective date to take effect January 1, 2019, but continue to allow the State Treasurer and Commissioner of Banking and Insurance to take such anticipatory administrative action in advance thereof as shall be necessary for the implementation of the bill.