Research & Commentary: New Jersey Doesn’t Need An Individual Mandate

Published March 22, 2018

In an attempt to shore up New Jersey’s individual health insurance exchange, state lawmakers are considering imposing the most unpopular provision of the Affordable Care Act (ACA): the individual mandate.

The New Jersey Health Insurance Market Preservation Act was crafted in response to the federal Tax Cuts and Jobs Act (TCJA) signed into law by President Donald Trump in December 2017. The TCJA will end the controversial individual mandate penalty beginning in January 2019.

The New Jersey proposal would force residents to purchase expensive health insurance or pay a financial penalty on their tax filings equal to 2.5 percent of their adjusted gross income or $695 per adult and $347.50 per child, whichever amount is greater. Penalties collected would be funneled to either a state reinsurance fund, yet to be established, or a children’s insurance subsidy fund. The state could collect more than $93.2 million in tax penalties, according to Internal Revenue Service data.

The law would require New Jerseyans to buy health insurance that meets the “minimum essential coverage” standards, which include state-mandated health benefits even more comprehensive than the 10 benefits mandated by the ACA. Not surprisingly, New Jersey has the most expensive average monthly premium in the individual market, according to the latest data from the Kaiser Family Foundation.

These mandates, plus regulations that undermine insurance carriers’ ability to medically underwrite premiums, such as community rating and guaranteed issue, artificially increase premium costs and encourage higher deductibles in the individual market. A 2010 report by the Heritage Foundation estimates mandated benefits create a 27–30 percent price increase in the individual health insurance marketplace, and community rating raises premiums by 26–45 percent for individuals under 34 years old. Also, Kaiser Family Foundation research shows a 40-year-old ineligible for a tax subsidy and enrolled in the lowest-cost Silver Plan in New Jersey has faced higher monthly premiums. Costs over the past year have increased by 18 to 26 percent, depending on the enrollee’s county residence.

Similar to other states, New Jersey experienced a decline in its number of enrollees in the ACA exchange market. The state currently has 274,782 enrollees, nearly a 7 percent decrease from the 295,067 in 2017. This number is expected to trend downward over the next few years, as younger and healthier individuals choose not to purchase comprehensive insurance policies they don’t need and can’t afford. If necessary, these individuals can always sign up for health insurance later, because ACA precludes insurers from denying anyone a policy based on preexisting conditions.

In an attempt to stabilize the risk pool with low-cost enrollees, whose payments will primarily go toward paying the health care expenses of high-cost, sicker people, lawmakers in New Jersey and several other states—including California, Connecticut, and Maryland—are advancing legislation to force healthier individuals to enter or stay in a state health insurance exchange. This plan hasn’t worked on a national scale, and it’s unlikely to work in the Garden State in the future. Instead of buying insurance, many people will simply move to another state or look for loopholes. Some may attempt to enroll in Medicaid instead.

If New Jersey legislators want to increase the number of residents who have health insurance, they should promote policies that will help bring down skyrocketing health care costs and insurance premiums, not force people to buy a product they don’t want and may not be able to afford.

Lawmakers could start by establishing state high-risk pools for uninsurable people, repealing costly mandated benefits, allowing insurance companies to underwrite plans, eliminating certificate-of-need laws, and adding health savings account options for state employees and Medicaid enrollees.

Another option is to apply for Section 1332 innovation waivers to the Centers for Medicare and Medicaid Services. These waivers give states flexibility in administering exchanges and crafting affordable insurance plans.


The following documents contain more information about health insurance policy. 

Don’t Wait for Congress to Fix Health Care…/dont-wait-for-congress-to-fix-health-care
In this Policy Brief, Heartland Senior Policy Analyst Matthew Glans documents the failure of Medicaid to deliver quality care to the nation’s poor and disabled, even as it drives health care spending to unsustainable heights. Glans argues states can follow the successful examples of Florida and Rhode Island to reform their Medicaid programs, or submit even more ambitious requests for waivers to the Department of Health and Human Services—a procedure the Trump administration has encouraged.

Trends in Employer-Sponsored Insurance Offer and Coverage Rates
This report from the Kaiser Family Foundation looks at the amount and percent of non-elderly workers covered by employer-based health insurance plans and how these amounts have changed over the past 15 years.

Employer Health Benefits
This 2016 Summary of Findings looks at employer contributions and worker contributions to employer-sponsored health insurance. It breaks these contributions down by the type of coverage, type of insurance plan, and type of firm.

State Insurance Mandates and the Aca Essential Benefits Provisions
NCSL gives an overview of the different health benefit mandates in all the 50 states. These mandates dictate what services, providers, and persons insurance plans must cover. There are more than 1,900 mandate laws currently on the books among all states.

How Premiums Are Changing in 2018
Kaiser Family Foundation researchers examine the premium rate increases consumers face in Obamacare marketplaces, which have occurred in large part because of the drop in insurer participation.

Section 1332 State Innovation Waivers: Current Status and Potential Changes
This Issue Brief from the Kaiser Family Foundation provides an overview of Section 1332 Medicaid waivers, how they are approved and financed, how states have used them, and how they have impacted health care reform.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website and PolicyBot, Heartland’s free online research database. 

If you have any questions about this issue or The Heartland Institute’s website, contact Arianna Wilkerson, Heartland’s government relations coordinator, at [email protected] or 312/377-4000.