Why New Jersey Has High Level of Uninsured

Published November 5, 2009

As health care reform dominates discussions on Capitol Hill, the experience of states such as New Jersey, which has one of the largest uninsured populations in the country, reveals the challenges of attempting to expand coverage through tighter regulation and higher taxes.

Michael Bond, a senior fellow at the National Center for Policy Analysis and coauthor of a recent study on state health reform, says the primary reason New Jersey has so many uninsured individuals is the high costs of coverage in the state.

“Costs are driven by community rating, guaranteed issue, mandates, and a lack of competition,” Bond said. These are all factors that hurt New Jersey, where premium costs are nearly twice the national average, among the highest of any state.

Insurance ‘a Bad Deal’

In 2007, 1.3 million residents of the state lacked insurance coverage. A majority of those uninsured are employees of small businesses or other individuals who don’t have access to employer-provided policies.

Cost is a definite factor, Bond says: While an average family in Texas paid $5,501 in 2006-2007 for coverage, the average family in New Jersey paid $10,398.

“The uninsured generally find purchasing insurance is a bad deal relative to their health care costs,” said Linda Gorman, a senior fellow with the Independence Institute, a Colorado-based think tank. “To increase the number of people who are insured, you need to lower the cost of health care through deregulation and the elimination of taxes.”

Other States Lowering Costs

While New Jersey struggles to find health care reform solutions, other states have found paths that lower costs and give people incentives to live healthier lives.

“We should create a market-making exchange where all firms can register to allow employees, along with self-employed/individuals, to buy insurance from many competing firms at actuarially fair prices,” Bond said. “There should be a redirecting of funds paid to medical providers into credits for the sickest, highest-premium purchasers.”

Bond suggests as a positive example Florida, where Medicaid reform allows choices for beneficiaries with risk-adjusted premiums and financial incentives to become healthy or remain so.

“We should thoroughly review state Medicaid programs and reform them to look more like private health insurance policies that have incentives to discourage overuse of medical services and have fewer controls on physicians,” Gorman said.

‘Government Is the Problem’

Gorman says the best models to look to are the cash and counseling programs for Medicaid and the deregulation of health insurance markets for private insurance.

“The important lesson states should learn is that increasing government control of health care increases costs,” Gorman said. “We need to recognize that government is the problem, not the solution.”

Sarah McIntosh ([email protected]) teaches constitutional law and American politics at Wichita State University in Kansas.

For more information …

“Applying the Lessons of State Health Reform,” National Center for Policy Analysis, Study No. 323, September 24, 2009: http://www.heartland.org/policybot/results/26240