New Jersey Governor Phil Murphy signed Assembly Bill
4389 into law on Friday, July 31. The New Jersey law,
effective January 1, 2021, imposes a 2.5% tax on the net
premiums collected for individual and large group health
plans and is estimated to generate nearly $220 million
annually. The funds will be used make insurance more
affordable for working and middle-class consumers.
Background
Section 9010 of the Affordable Care Act imposed a health
insurance tax (“HIT”) on insurers beginning in 2014. The
HIT is an annual fee that applies to insurers that offer fully
insured health coverage in the individual market, group
market and public programs. While Congress imposed a
one-year moratorium on the HIT for 2017, the HIT resumed
in 2018 and was subsequently repealed beginning in 2021.
Assembly Bill 4389 was introduced on July 9, 2020, to
replace the HIT upon its expiration in January. On July 31,
Governor Murphy signed the Bill into law.
The New Jersey Health Insurer Assessment
(“HIA”)
The new legislation requires insurance carriers to report to
the Department of Banking and Insurance the net value of
premium they write during the past year for individual and
large group health plans. Premium from small group plans,
Medicaid and Medicare policies, nonprofit dental plans and
certain self-funded group employer coverage are not included
in the assessment. Insurers will be required to pay a 2.5%
assessment on the value of these premiums. The money
collected will be used to increase affordability and greater
access to health insurance for the uninsured through a number
of means including subsidies, reinsurance and other efforts.
The intent is to offer additional financial help to NJ residents
when the state launches its own Marketplace in the fall.
Employer Impact
New Jersey rates for 2021 health plans will be announced
by the carriers shortly. There is growing concern about the
2021 rates which will include the HIA, given the impact of
COVID-19 on individuals and businesses of all sizes. We are
likely to see this increase passed through to employers in a
time when they are already struggling in the pandemic. We
will continue to monitor this situation and keep you apprised.