Gov. Phil Murphy is likely to sign a bill lawmakers sent him on Thursday that would amount to a tax on health insurers, replacing one at the federal level that expires this year.
Senate Bill 2676 would levy a 2.5 percent “health insurance assessment” on health insurance company’s “net written premiums,” or the premiums written by an insurance company over a given period of time. The $300 million the tax would generate would go toward subsidizing small businesses and individuals buying their own health plans.
Two-thirds of it would come from premiums on large employers.
Roughly $210 million would go toward subsidizing premiums for those buying their own insurance, while $75 million would go toward the state’s reinsurance pool, to help insurers with very large medical claims, according to the bill’s lower house sponsor, Assemblyman John McKeon, D-27th District.
Lawmakers scaled back several facets of the bill on Monday, narrowing down who the fees would apply to and who could benefit from the insurance fund. They exempted small employer health plans, dental health plans and multiple employer health plans.
The tax would go into effect on Jan. 1, 2021, and replace an identical tax on the federal level – part of the Affordable Care Act – that expires that same day.
The measure was approved by a 43-30 vote in the state Assembly, where it met opposition from Republicans decrying it as a tax hike during a recession when businesses would be ill-prepared to handle it.
“Taxing health insurance policies at this time … is a devastating move to families,” Assembly Republican Leader Jon Bramnick, R-21st District, said during a floor debate on the measure.
The measure was passed by a 22-16 vote in the state Senate with no debate or discussion.
Progressives contend that the measure will subsidize health care costs for small businesses at a time when many find themselves cash-strapped amid the global pandemic.
“By replacing what stood at the federal level, this legislation simply serves as a state-level continuation of a soon-to-expire assessment that insurers were already paying,” McKeon said in a Thursday statement.
Proponents also argue that it would help the hundreds of thousands of state residents who’ve lost their jobs and employer-provided health care during the pandemic. According to a July 17 report by Families USA, roughly 124,000 New Jersyans have lost their health care between February and May due to job losses.
“This will allow us to more appropriately and significantly enhance the individual market in New Jersey and provide subsidies to keep rates down so insurance is more affordable,” McKeon added.
Gov. Phil Murphy, at a virtual health care roundtable last week, argued that a state-level HIA would shield the state against “repeated efforts from the federal government to undermine the Affordable Care Act.”
“This is not a new tax,” Murphy said. “This is replacing a federal levy that exists.”
A number of bills the governor signed over the past two years mirror many facets of the Affordable Care Act, such as a state-level individual mandate that requires residents to have health insurance or pay a penalty, which goes into the state’s reinsurance fund.
Other bills Murphy signed require health plans to include a certain framework of services they will cover, and keep someone on their parent’s health plan until the age of 26.