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The state is transitioning towards having its own enrollment platform — first with a switch to a state-based exchange using HealthCare.gov for 2020, and then with a plan to operate a fully state-run exchange by 2021.

Five carriers offered plans in the New Jersey exchange in 2016, but three of them exited the exchange at the end of 2016, leaving two carriers offering plans for 2017. For 2018, Oscar Health – one of the insurers that had exited at the end of 2016 – returned to the exchange, bringing the total number of carriers to three. Oscar’s coverage area in 2018 was larger than it was when they offered exchange plans in the state previously.

All three insurers are continuing to offer coverage in New Jersey’s exchange in 2020, and although average rates increased by 8.7 percent for 2020, they decreased by 9.3 percent in 2019 due to the state’s new individual mandate and reinsurance program. So average pre-subsidy premiums are still a little lower in 2020 than they were in 2018.

New Jersey has a state-based exchange using HealthCare.gov in 2020, and plans to have its own fully state-run health insurance exchange by the fall of 2020

Since the exchanges opened for business in the fall of 2013, New Jersey has used HealthCare.gov, like the majority of the rest of the states. But in March 2019, Governor Phil Murphy notified CMS that New Jersey plans to begin running its own health insurance exchange by the 2021 plan year (ie, operational by November 2020, in time for open enrollment for 2021 coverage).

States that rely fully on the federally run exchange currently have to pay 3 percent of premiums to the federal government for the use of HealthCare.gov, the federally-run call center, and things like tech support, marketing, and enrollment assistance. This is a reduction from the 3.5 percent fee that was charged prior to 2020, although federal funding for outreach and enrollment assistance have been drastically cut under the Trump administration, and premiums have increased drastically since 2014.

State-run exchanges that use the HealthCare.gov enrollment platform are charged a fee equal to 2.5 percent of premiums in 2020, down from 3 percent in 2019. So New Jersey is paying that 2.5 percent fee in 2020. But even after the state transitions to a fully state-run exchange, they plan to continue to collect the same 3.5 percent fee that was collected by the federal government in 2019. But instead of sending it to the federal government, New Jersey will use the money — estimated at $50 million per year — to operate a state-run exchange.

By running its own exchange, New Jersey will have significantly more control. The state will have the flexibility to extend open enrollment (most of the other state-run exchanges have done so in previous years, but states that use Healthcare.gov don’t have that option), target the state’s enrollment and outreach efforts in the most useful fashion, design the enrollment website and customer service center, and have more regulatory control over the plans for sale in the market.

The loss of the federal individual mandate penalty drove premiums up all across the country for 2019, but New Jersey insulated itself from that by implementing its own mandate (when there’s no mandate, healthy people are less likely to maintain coverage, which results in a less healthy risk pool and higher premiums for everyone who remains insured).

In addition, New Jersey had submitted a 1332 waiver proposal, seeking federal pass-through funding for a reinsurance program. CMS was still reviewing that proposal when rates were being filed, so the 5.8 percent average proposed rate increase for New Jersey plans did not account for the reinsurance program. Federal approval for the state’s 1332 waiver came in August 2018. State regulators had already noted that the rates would be revised if and when the reinsurance program was approved, and they expected the 2019 rates to be 15 percent lower with reinsurance than they would otherwise have been.

Sure enough, Governor Murphy’s office announced in early September that average rates in the individual market would decline by 9.3 percent in 2019, after accounting for the impact of the reinsurance program. So if New Jersey hadn’t done anything at all, rates would have increased by an average of nearly 13 percent. But instead, because the state implemented an individual mandate and a reinsurance program, the average rates decreased by more than 9 percent.

The approved base rates for each plan, as well as the applicable age-based multipliers, are available here.

For perspective, here’s an overview of how rates have changed in New Jersey’s market over the years:

ACA-compliant plans debuted for 2014, and the rates were essentially educated guesses.

For 2015, across all plans and metal levels in the New Jersey exchange, an analysis from the Commonwealth Fund found an average 2015 premium increase of just 2 percent for a 40-year-old non-smoker.

For 2017, exchange participation had dropped to just AmeriHealth and Horizon, and the average rate increase was 8.8 percent.

For 2018, exchange participation grew to three insurers, with Oscar’s re-entry to the exchange. The average rate increase was 22 percent, due in large part to the uncertainty caused by federal GOP efforts to repeal the ACA in 2017, and the market instability that caused, as well as the fact that silver plan rates began to include the cost of cost-sharing reductions (CSR) as of 2018 (details below).

In mid-October, the New Jersey Department of Banking and Insurance confirmed by phone that the cost of CSR had been incorporated in the on-exchange silver plan rates for 2018, leading to an overall average rate increase of 22 percent.

Adding the cost of CSR to silver plan premiums ends up protecting the majority of enrollees, particularly if the cost of CSR is only added to on-exchange plans an insurers offer separate (cheaper) off-exchange silver plans. Premium subsidies end up being larger than they would otherwise have been, since the subsidies are based on the cost of the second-lowest-cost silver plan. 78 percent of New Jersey exchange enrollees receive premium subsidies. Those enrollees were protected from the brunt of the rate increases in 2018 (as noted above, average rates decreased for 2019). Premium subsidy recipients who picked bronze or gold plans likely found that their net premiums decreased for 2018, as the larger subsidies based on higher silver plan premiums can be applied to plans at other metal levels, despite the fact that the other metal levels don’t have the cost of CSR added to their premiums.

Off-exchange enrollees and unsubsidized exchange enrollees have to pay close attention to their plan choices, however. If they want a silver plan, the best bet may be an off-exchange-only silver plan, in order to avoid the CSR cost that has been added to on-exchange silver plans. Otherwise, bronze and gold plans could also be a good choice.

2020 enrollment: Another drop in the number of people buying plans

Enrollment in New Jersey’s exchange peaked in 2017, when 295,000 people enrolled. But it’s declined each year since then. 247,543 people enrolled during the most recent open enrollment period, for 2020 coverage.

Across all states that use HealthCare.gov, enrollment peaked in 2016, and has been declining each year since then. The declines have been caused by a variety of factors, including uncertainty about the GOP efforts to repeal the ACA, and the Trump administration’s decision to sharply reduce funding for Navigators and exchange marketing, and increasing premiums (particularly for people who don’t get premium subsidies).

For perspective, here’s a look at enrollment in prior years in New Jersey’s exchange:

2014: 161,775 people enrolled in plans through the New Jersey exchange during the first open enrollment period, for 2014 coverage. This enrollment period lasted for six months, as it was the first time that individual market coverage had been limited to an enrollment window (prior to 2014, people could apply for individual market plans anytime they wanted, but coverage was medically underwritten).

Lawmakers in New Jersey considered a variety of health care reform bills in the 2018 session. Two vitally important bills – to create an individual mandate and a reinsurance program — passed and were signed into law by Governor Murphy in 2018.

New Jersey joined Massachusetts in having an individual mandate in 2019 (as did DC), and was one of several states that implemented a reinsurance program in 2019. Vermont has also enacted an individual mandate, but it won’t take effect until 2020.

In addition, Governor Murphy signed legislation to protect consumers from surprise balance billing. Here’s a summary of the health care reform legislation New Jersey enacted in 2018:

A.3380: The legislation implemented a state-based individual mandate in New Jersey, effective in 2019. It passed 23-13 in the Senate, and 50-23 in the Assembly, and Gov. Murphy signed it into law in late May, 2018. The ACA’s individual mandate penalty was eliminated after the end of 2018, under the terms of the GOP tax bill that was enacted in late 2017. New Jersey’s mandate took effect seamlessly, as of 2019. It is structured in much the same way as the ACA’s individual mandate penalty, although the maximum penalty is tied to the average cost of a bronze plan in NJ, rather than the national average cost. The penalty will be assessed on state tax returns (starting in early 2020, for 2019 returns), rather than federal tax returns. For reference, the ACA’s individual mandate penalty was assessed on 188,750 federal tax returns filed by New Jersey residents for the 2015 tax year, with total penalties of $93.3 million. The revenue collected by the state under the mandate penalty will be used to provide state funding for the reinsurance program called for in S.1878 (discussed below).

S.1878: The legislation directed the state to apply for a 1332 waiver in order to obtain federal funding for a state-based reinsurance program. It passed 22-14 in the Senate, and 46-22 in the Assembly, and Governor Murphy signed it into law in late May, 2018. New Jersey submitted a 1332 waiver proposal for the reinsurance program to CMS on July 2, 2018, and it was approved by CMS the following month, granting federal pass-through funding that the state will use to operate the reinsurance program. Before the reinsurance program had received federal approval, insurers in the state had proposed an average rate increase of 5.8 percent for 2019. But rates were revised once the reinsurance program waiver was approved, resulting in an average decrease of more than 9 percent. New Jersey’s reinsurance program will reimburse insurers for 60 percent of the cost of claims that exceed $40,000, until the claims reach $215,000. States that have implemented reinsurance programs are showing improved market stability and premiums that have either declined or been limited to very modest increases. Alaska established a reinsurance program in 2016, and it has been credited with keeping premiums increases much lower than most states in 2017, and sharp premium decreases for 2018. Minnesota and Oregon implemented reinsurance programs for 2018, with average premiums declining in Minnesota and increasing by only single-digit percentages in Oregon.

A.2039: This legislation protects consumers from surprise balance bills from out-of-network providers who perform services at in-network facilities. It also requires medical facilities to clearly explain to patients whether the facility is in or out of network with the patient’s insurer, and requires insurers and out-of-network providers to enter binding arbitration when billing disputes arise. Self-insured health plans are not subject to state law (they’re governed instead by federal law, under ERISA), but self-insured plans can opt in to the provisions of the state’s surprise billing protections. Several states have addressed the surprise billing issue, but New Jersey’s new legislation is considered the strongest in the country. A.2039 passed 21-13 in the Senate, and 48-21 in the Assembly, and was signed into law on June 1, 2018. Similar measures have been debated in New Jersey for the last decade.

Insurer participation in New Jersey’s exchange

As is the case in most states, insurer participation in the exchange has varied over the years in New Jersey. In 2014, there were only three insurers offering plans: Horizon Blue Cross Blue Shield, AmeriHealth, and Health Republic of New Jersey (Freelancer’s CO-OP). But for 2015, Oscar and Oxford joined the exchange. There have been several additional changes since then:

Health Republic (CO-OP)

Health Republic Insurance of New Jersey was one of the ACA-created CO-OPs, most of which have not survived. In September 2016, Health Republic was placed into rehabilitation by the NJ Department of Banking and Securities. As a result, the CO-OP stopped selling new policies, and existing policies terminated at the end of 2016.

The CO-OP noted that their financial collapse stemmed in large part from the risk adjustment program, under which they had to pay $46.3 million ($38.6 million for individual market plans, and $7.7 million for small group plans). The CO-OP had been told by CMS at the end of 2015 that their projected liability was about $17 million, and that still appeared to be the case as of April 2016, but when the final numbers came out in June, the carrier owed more than two and a half times that much.

Horizon Blue Cross Blue Shield — New Jersey’s largest health insurer — began offering new health plans in 2016 that had premiums about 15 percent lower than the carrier’s 2015 rates, in addition to lower copays and deductibles in exchange for using specified hospitals and providers (as was the case with most plans, premiums for Horizon’s OMNIA plans increased in 2017 and 2018, but continued to be about 10 percent lower than other similar Horizon plans). Not surprisingly, residents who were polled about the plans expressed support for the concept.

By early 2017, after two years of open enrollment windows in which OMNIA plans were available, Horizon reported that 238,000 people had enrolled in the plans, representing a large majority of the nearly 276,000 individual market Horizon enrollees at that point.

Horizon’s new plans were created under the OMNIA Alliance partnership with 22 hospitals, plus an additional 14 hospitals that are designated “Tier 1.” These 36 hospitals (39 hospitals as of 2018) agreed to accept lower reimbursements in trade for higher volume (since insureds have to use one of those hospitals in order to get the lower copays and deductibles), and also agreed to reimbursement based on quality of care and patient outcomes, rather than fee-for-service reimbursement (it was later confirmed that Horizon favored larger hospitals over smaller hospitals, and that price didn’t play a role in the selection of Tier 1 hospitals).

The other 36 hospitals in New Jersey were designated “Tier 2” under the new plans, and insureds who use those hospitals pay higher copays and deductibles (although insureds still have access to those hospitals, and the hospitals continue to be reimbursed by Horizon if insureds choose to use them). Those hospitals were upset that they were left out, and say they were caught off guard by the new Horizon plans.

A group of 17 Tier 2 hospitals filed a lawsuit in November to stop the OMNIA Alliance, and asked the New Jersey Department of Banking and Insurance (DOBI) to intervene. But the DOBI refused, noting that shuttering the new Horizon plans in the middle of open enrollment – once plans had already been purchased by consumers – would potentially “create significant upheaval and disruption to the New Jersey marketplace and its consumers.” In June 2016, an appeals court ruled against the hospitals, upholding the state’s decision to allow the tiered network plans to be sold. Another lawsuit, brought by seven Tier 2 hospitals, continued until 2018. The case was scheduled to go to trial in October 2018, but Horizon settled with the last plaintiff before the trial began.

Horizon’s approach in New Jersey is a compromise between truly narrow network HMO plans (where enrollees only have coverage at designated facilities) and the broad network PPO plans that dominated the pre-ACA market. Horizon’s CEO has defended the new plans, and noted that in a state where healthcare costs were the second-highest in the country, innovation to lower them is necessary.

History of the New Jersey exchange

The New Jersey Assembly passed two bills authorizing a state-run exchange in 2012, but both were vetoed by then-Gov. Chris Christie. Those vetoes left the federal government to operate the health insurance marketplace in New Jersey, although that is poised to change under the Murphy Administration. Governor Christie took a very hands-off approach to the ACA, and the state did little to promote the HHS-run exchange under his Administration, leaving most of the heavy lifting to brokers, navigators and HHS.

The state did opt to expand Medicaid however, making health insurance available to hundreds of thousands of low-income residents.

New Jersey Senator Nia Gill introduced the legislation again in 2015 to create a state-run exchange. But her bill, S540, didn’t advance out of committee during the 2015 session. Gill was critical of Gov. Christie’s vetoes of the prior exchange-creation legislation, noting that New Jersey subsidies wouldn’t have been dependent on the outcome of the King v. Burwell case if the state had created its own exchange (subsidies ended up being safe when the Supreme Court ruled that subsidies were legal in every state, not just those that ran their own exchanges).

In January 2014, U.S. Rep Bill Pascrell (D, NJ) introduced a bill that would allow HHS to recoup ACA outreach funding that remains unused by Republican governors like Chris Christie who refused to use the money in their states to promote the ACA and educate residents about its benefits. New Jersey officials were involved in lengthy discussions with HHS over the use of $7.67 million in federal funds that had been granted to NJ in 2012 to use for promoting the state’s health insurance exchange.

The money was intended for outreach, advertising and general promotion of the ACA and the exchange, although NJ officials wanted to use it to staff a call center for the state’s expanded Medicaid program. But HHS had made it clear last year that such a use was not permitted.

Ultimately, the state and HHS were not able to come to a compromise on the issue. New Jersey forfeited the money in February 2015 when the deadline passed, and HHS officially rescinded the funds in May 2015.