LEGISLATIVE FISCAL ESTIMATE
SENATE COMMITTEE SUBSTITUTE FOR
SENATE, No. 1878
STATE OF NEW JERSEY
218th LEGISLATURE
DATED: APRIL 23, 2018
SUMMARY
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Synopsis: |
“New Jersey Health Insurance Premium Security Act;” establishes health insurance reinsurance plan. |
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Type of Impact: |
One-time State Expenditure Increase. Potential Annual State Expenditure and Revenue Increases. |
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Agencies Affected: |
Department of Banking and Insurance, Department of the Treasury, the board of directors of the New Jersey Individual Health Coverage Program (board). |
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Office of Legislative Services Estimate |
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Fiscal Impact |
Annual |
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State Expenditure Increase |
Indeterminate |
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Potential State Revenue Increase |
Indeterminate |
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· The Office of Legislative Services (OLS) notes that the bill will result in a one-time indeterminate increase in State administrative expenditures. The Department of Banking and Insurance (DOBI) will accrue the additional expenses in applying for a waiver from the United States Secretary of Health and Human Services, whose approval is necessary for the implementation of the reinsurance program envisioned by the bill.
· Assuming that the federal government grants the waiver and that DOBI elects to implement the reinsurance program, the bill will have four additional indeterminate annual fiscal impacts:
Ø An annual increase in State administrative expenditures tied to DOBI’s and the board’s implementation of the program;
Ø An annual increase in State expenditures; including amounts annually appropriated, which the board, in consultation with the commissioner, determines to be necessary to fully fund the plan to accomplish the objectives of the bill, and the amounts disbursed from the bill’s dedicated New Jersey Health Insurance Premium Security Fund to make reinsurance payments to eligible insurance carriers; and
Ø An annual increase in State revenue equal to the amounts deposited into the New Jersey Health Insurance Premium Security Fund; including any federal funds allocated to the reinsurance program and any penalty payments by insurance carriers for violations of the bill.
BILL DESCRIPTION
This bill, entitled the “New Jersey Health Insurance Premium Security Act,” directs DOBI to apply to the United States Secretary of Health and Human Services for a waiver of certain provisions of the Affordable Care Act to support a reinsurance program to help stabilize premiums in the individual health insurance market in New Jersey, for plan years beginning on or after January 1, 2019.
If the waiver is granted and DOBI accepts the waiver, the bill creates a reinsurance plan to be known as the Health Insurance Premium Security Plan. The board of directors of the New Jersey Individual Health Coverage Program (board), in consultation with the commissioner, is to administer the reinsurance plan, a responsibility that includes the setting of specific payment calculation parameters and the exercise of certain auditing and review functions to ensure the plan operates pursuant to the bill’s provisions.
In addition, the bill creates the New Jersey Health Insurance Premium Security Fund in the State Treasury as the repository for moneys collected to finance the reinsurance plan. The moneys include: (a) proceeds from the tax penalty imposed under the “New Jersey Health Insurance Market Preservation Act,” currently pending before the Legislature; (b) federal payments received as a result of the approved waiver; and (c) annual State appropriations equal to the amounts which the board, in consultation with the commissioner, determines to be necessary to fully fund the plan to accomplish the objectives of the bill.
DOBI must also publish an annual report on the department’s website on the operation of the plan, including the results of an audit performed by an independent certified public accountant for each benefit year.
The bill also penalizes any carrier that violates any provision of the bill in an amount not less than $1,000 or more than $10,000 for each day of violation.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS notes that the bill will result in a one-time indeterminate increase in State administrative expenditures. DOBI will accrue the additional expenses in applying for a waiver from the United States Secretary of Health and Human Services, whose approval is necessary for the implementation of the reinsurance program envisioned by the bill. If the waiver is approved, the bill authorizes the commissioner to accept the waiver after the commissioner’s determination that implementation of the bill: (1) will be beneficial to policyholders; and (2) is expected to stabilize or reduce premiums in the individual health insurance market through a reduction in what indicated premium rates would be without the plan.
Assuming that the federal government grants the waiver and that DOBI elects to implement the reinsurance program, the bill will have four additional indeterminate annual fiscal impacts.
First, the bill will result in an indeterminate annual increase in State administrative expenditures tied to DOBI’s and the board’s implementation of the program, including the cost of preparing the required annual reports. Absent information from DOBI, however, the OLS cannot anticipate the resources the department will allocate to operating the program.
Second, the bill will result in an indeterminate annual State expenditure including amounts annually appropriated out of the General Fund which the board, in consultation with the commissioner, determines to be necessary to fully fund the plan to accomplish the objectives of the bill, and amounts disbursed from the bill’s dedicated New Jersey Health Insurance Premium Security Fund to make reinsurance payments to eligible insurance carriers. The OLS cannot quantify the amount of annual reinsurance payments because the bill grants the board substantial discretion in establishing payment calculation parameters and the OLS cannot anticipate the board’s decisions in that regard.
Third, the bill will result in an indeterminate annual State revenue increase equal to the amounts deposited into the New Jersey Health Insurance Premium Security Fund, including: (a) proceeds from the tax penalty imposed under the “New Jersey Health Insurance Market Preservation Act,” currently pending before the Legislature; (b) federal payments received as a result of the approved waiver; and (c) annual State appropriations equal to the amounts which the board, in consultation with the commissioner, determines to be necessary to fully fund the plan to accomplish the objectives of the bill. Accordingly, the bill’s indeterminate increase in State administrative expenditures and increase in revenue will partially, if not fully, offset one another.
The bill provides that the fund should be funded to levels based upon actuarial analysis to stabilize or reduce premium rates in the individual market achieving between a 10% and 20% reduction in what indicated premium rates would be for the applicable benefit year without the plan. According to responses to FY 2018 OLS discussion points, DOBI presented tables and links with updated enrollment and premium cost information on the New Jersey individual market administered through the Individual Health Coverage Program. Using this information, a 10% to 20% reduction in premiums in the individual health insurance market may result in Gold premium rates that for 2018 range from $495.50 to $730.78 (as seen in table below), being decreased by $49.55 - $73.08 and $99.10 - $146.16, respectively from what indicated rates would be for the applicable benefit year without the plan.
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NJ Individual Health Benefits Plans and Rates |
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Plan Metal Level |
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Base Rate |
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10 % Savings from Current Premiums |
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20 % Savings from Current Premiums |
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Gold |
$495.50 - $730.78 |
$49.55 - $73.08 |
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$99.10 - $146.16 |
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Silver |
$311.86 - $795.87 |
$31.19 - $79.59 |
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$62.37 - $159.17 |
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Bronze |
$251.63 - $709.49 |
$25.16 - $70.95 |
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$50.33 - $141.90 |
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Catastrophic |
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$180.54 - $272.04 |
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$18.05 - $27.20 |
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$36.11 - $54.41 |
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The OLS also notes that, assuming the waiver is granted and accepted, there may be a potential indeterminate annual reduction in State charity care disbursements to hospitals, but only if the following chain of events occurs: if the bill results in lower insurance rates, then insurance coverage will become more affordable; if insurance coverage becomes more affordable, then more individuals are likely to obtain insurance coverage or better insurance coverage; if more hospital patients can pay their bills because they have insurance coverage, then hospitals have reduced outstanding uncompensated care liabilities; as hospitals have reduced outstanding uncompensated care liabilities, the State can then reduce charity care payments to hospitals.
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Section: |
Commerce, Labor and Industry |
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Analyst: |
Associate Fiscal Analyst |
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Approved: |
Frank W. Haines III Legislative Budget and Finance Officer |
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).