On May 30, 2018, New Jersey Governor Phil Murphy signed A. 3380, becoming the first state to require individuals to carry health insurance after the federal Tax Cuts and Jobs Act (P.L. 115-97) (TCJA) zeroed out the individual mandate under the Affordable Care Act (ACA). Under the new law, all New Jersey taxpayers and their dependents, if they are all considered applicable individuals, must have minimum essential coverage for every month beginning after December 31, 2018.

Background

Section 5000A of the Internal Revenue Code of 1986, as amended (IRC), generally requires individuals to either carry health insurance or pay an excise tax (the so-called individual mandate). The TJCA amended Section 5000A to reduce the excise tax to $0 beginning in calendar year 2019. In response to that federal change, several states have considered adopting a similar provision at the state level to keep younger and healthier individuals in the exchange market pool. New Jersey has become the first state to enact such a provision since the TJCA's enactment. (Massachusetts under its pre-ACA law has an individual health care mandate, which was suspended as long as the federal mandate applied. The commonwealth's mandate has been reasserted following the zeroing out of the federal mandate.)

Summary of "New Jersey Health Insurance Market Preservation Act" (A3380, or the Act)

A3380 was enacted on May 30, 2018, and will be effective January 1, 2019.

The Act requires all New Jersey taxpayers and their dependents, if they qualify as applicable individuals, to have minimum essential coverage for every month beginning after December 31, 2018. Like the ACA, the Act defines "applicable individual" as individuals who are subject to the mandate, but excludes individuals with religious exemptions, prisoners or those not lawfully present.

The penalty for not having minimum essential coverage is the same as the penalty under IRC Section 5000A before its amendment: 2.5% of the taxpayer's household income or $695 per adult and $347 per child, whichever is greater. To ensure taxpayers remain aware of their coverage status, the Act requires the State Treasurer to notify tax return filers each year from November 1 through November 30 if they or their dependents are not enrolled in minimum essential coverage. This notification will also include information on how individuals can obtain coverage.

Like the ACA, the Act will likely require employers maintaining self-insured health plans to report the coverage provided to their employees. The Act specifically incorporates the federal reporting requirements by referencing reporting under IRC Section 6055.

New Jersey also enacted a law (Senate Bill 1878) requiring its Department of Banking and Insurance to request a federal waiver to establish a reinsurance fund. The reinsurance fund, if approved, would receive the tax proceeds from the New Jersey individual mandate.

Implications

New Jersey is now the second state after Massachusetts to impose an individual mandate on its residents. IRS data collected by New Jersey Policy Perspective, however, showed that 189,000 New Jersey residents paid $93 million in fees in 2015 rather than having health insurance.

While employers may be able to satisfy the new reporting requirement by leveraging the information on federal Form 1095-C, it is still unclear whether New Jersey will have its own information reporting forms or whether the employer can just submit its federal Form 1095-C to the State. (Whether the IRS will change the reporting required on Form 1095-C for 2019 based on the TCJA's amendments to the federal individual mandate excise tax is also unclear).

Other states, including California, Illinois, Maryland, and the District of Columbia, have considered enacting their own individual mandates. Vermont recently enacted an individual mandate that will be effective on January 1, 2020, but the legislature must still establish the penalty amounts and the reporting and enforcement mechanisms.

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