New Jersey again has taken advantage of a federal reduction in the burden of the Affordable Care Act to create a new revenue source.
The ACA called for a federal tax on health plans to sunset at the end of this year. When it does, health policies in New Jersey for individuals and large businesses will have to keep paying — but to state government.
Democrats in the Legislature narrowly passed, by a party line vote, a bill creating the new 2.5% tax on premiums. Gov. Phil Murphy signed it into law on July 31, just in time for health insurers in New Jersey to include the cost in rates to workers, businesses and residents.
The N.J. Business & Industry Association said the tax is another cost to business at the worst possible time, as they struggle to survive the pandemic with its state lockdowns and restrictions.
The new tax is expected to produce $220 million a year in state revenue, starting in 2021. The state would use about $70 million of that in its reinsurance program.
Democrats said much of the rest would be used to subsidize policies in the individual market for residents with incomes of up to 400% of the federal poverty level — up to $51,040 for singles and $104,800 for a family of four.
The law, however, only recommends that’s how the new tax revenue should be spent, along with spending on “tax policies, outreach and enrollment efforts,” and other strategies. In the past such flexibility has let officials move revenue around and spend it wherever they wanted.
There’s a small consolation — it could have been worse.
The sponsors of the law had intended the tax to be 2.75% and levied against Medicare, Medicaid and small business health premiums as well. Just before passage legislators dropped those provisions.
This is the second time Murphy has replaced a federal cost reduction to consumers with a state cost increase to match. In 2018, when the federal government quit fining people for not buying a mandated health insurance policy, New Jersey started requiring people to buy and fining them if they didn’t.
This year, the state also has taken over the operation of the ACA insurance marketplace in New Jersey, giving it more control of the plans offered and a 3.5% tax on health plans that had gone to the federal government to support the system.
Pity the many working families who pay for health insurance through their employer and those who don’t qualify for reduced-price government plans. For them, this latest action just worsens the two main problems with health care — that it’s too costly and too complicated.