The health care act passed by Congress and signed by President Obama is titled the "Patient Protection & Affordable Care Act". Disappointingly, this title is misleading, as it penalizes residents in states like New Jersey that enacted health care laws decades before the federal government, and which already protect patients and ensure access to healthcare.
As a result of these protections, New Jersey is ahead of most states in already applying requirements that are mirrored in the new Federal health care reform law.
Our state law has required guaranteed availability of coverage to every small employer and individual, guaranteed renewability, provides a modified community rating and sets a minimum medical loss ratio of 80% in the individual and small employer markets.
You would think that would put us at an advantage. However, to state residents paying premiums under New Jersey individual contracts, it promises to be a big financial disadvantage.
The federal law set aside $5 billion for high-risk individuals who do not have insurance. Under the law, the funds must be used for people with pre-existing conditions who have been without adequate coverage for six months. The funds must be used to pay for the difference between their actual claims and a standard premium.
The economics of health insurance are not that mysterious. Premiums for people with lower claims subsidize premiums for those with higher claims. New Jersey law requires insurers to accept all comers regardless of health status, so there are a lot of people with relatively higher claims, and our premiums are high here for everyone. Many other states let insurance companies medically underwrite, meaning they can and do reject sick people. Premium rates are lower in those states, but there are many who can't buy insurance.
So states that have enjoyed a less expensive healthcare market by keeping sick people out can now keep their expenses down and cover their uninsured under this new program. For people already paying higher premiums into the individual market in guaranteed-issue states like New Jersey, none of the money is available to lower their costs. That's not fair.
The individual health coverage market in New Jersey has operated like a high-risk pool, with the claims for those high risks paid for through the premiums of other participants. The federal high-risk funds should be made available to reduce those premiums, so New Jersey residents buying insurance enjoy the same advantages as insurance purchasers in other states. Individual insurance buyers in New Jersey who are already covered need relief from high premiums.
We also have to make the program work for those who have gone without insurance because of the high prices. Guaranteed availability without affordability is an empty promise.
Since the new federal funds must be used for people with pre-existing conditions who have been without creditable or adequate coverage for six months, and the funds must be used to pay for the difference between people's actual claims and a standard premium, we need the Federal government to agree to:
--Let us lower the bar on what is considered standard premium in New Jersey so that we are more in line with states that medically underwrite. Since the new federal funds will be used to pay for the difference between people's actual claims and a standard premium, this will help us maximize funding.
--Let us define creditable coverage as narrowly as possible so the most people are eligible; and
--Let us define pre-existing condition as broadly as possible to reach more News Jersey residents.
We hope Washington listens.
Tom Considine is the New Jersey Commissioner of Banking & Insurance.