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May Day: Two States Enact Individual Health Insurance Mandates

By: Brady Bizarro, Esq.

Well, here we have it: the second and third states to enact individual health insurance mandates modeled after the federal mandate enshrined in the Affordable Care Act (“ACA”). While many states had been considering this kind of move (i.e. Maryland, California, Connecticut), New Jersey and Vermont grew tired of waiting around. These states have now openly defied the Trump Administration’s effective repeal of the ACA’s individual mandate at the end of 2017. They join Massachusetts, which was the first state to require its residents to purchase health insurance, and which served as the blueprint for the ACA.

Starting in 2019, New Jersey will require all of its nine million residents to obtain health insurance coverage. If they fail to do so, they will be subject to a penalty of $695, or 2.5% of a person’s income, whichever is greater (this is the same penalty as the federal mandate). The penalty amounts collected will help subsidize the cost of care for New Jersey’s seniors and chronically ill. The specifics of Vermont’s individual mandate have not been ironed out just yet, but the governor has commissioned a working group to work out the details in 2019. At this point, residents will have until 2020 to obtain health insurance coverage in Vermont.

These states are acting because they believe they will experience a significant drop in enrollment. That drop will likely drive up the cost of care for everyone due to adverse selection and the so-called “death spiral,” which leaves large numbers of very sick individuals isolated in risk pools. Naturally, opponents of state individual insurance mandates point out that imposing mandates does not lead to lower healthcare costs. Instead, they argue that mandates simply force individuals to buy plans that they cannot afford and often cannot use. 

In our industry, we know all too well that mandates alone do not lead to cost containment. That is why The Phia Group utilizes multiple, results-driven approaches to cost-containment. As with any policy initiative, though, having to follow different rules based on the state in which you live is not likely to yield positive results when dealing with an industry as large and as ubiquitous as the health insurance industry. We’ll be watching to see which states follow New Jersey and Vermont in the coming months.