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A mandate for individuals to buy health insurance acts as a foundation for the national health care law, according to the federal government. Without it, the entire structure weakens.
During last week’s U.S. Supreme Court hearings on the law, Solicitor General Donald Verrilli cited New Jersey to support that argument.
Justice Antonin Scalia, in an exchange with Verrilli, said when people "have a substantial risk of incurring high medical bills, they'll buy insurance, like the rest of us."
Verrilli said: "That's the problem, Justice Scalia. That's -- and that's exactly the experience that the states had that made the imposition of guaranteed issue and community rating not only be ineffectual but be highly counterproductive. Rates, for example, in New Jersey doubled or tripled, went from 180,000 people covered in this market down to 80,000 people covered in this market."
PolitiFact New Jersey found the solicitor general is largely right.
Verrilli was referring to the individual market, a health insurance exchange that serves people who don’t have access to health insurance through their employer or through government programs such as Medicare.
In the early 1990s New Jersey implemented guaranteed issue -- a ban on insurers rejecting applicants -- and community rating -- a requirement prohibiting insurers from charging different rates regardless of risk -- in its individual market.
The federal law includes similar measures.
But unlike the federal government, New Jersey didn’t require residents to purchase health insurance. And, experts said, without a mechanism to push healthier people into buying coverage the state’s individual market nearly collapsed.
Data shows an initial spike then a steep decline in enrollment following the reforms. A 2004 article in the journal Health Affairs found the "current situation points to a market that is heading for collapse. Enrollment has declined from a peak of 186,130 lives at the end of 1995 to 84,968 at the end of 2001. In addition, premiums have increased two- to threefold above their early levels."
Enrollment in New Jersey’s market has rebounded since that report, but participation in a plan that allows for adjustment in rates based on age, gender and location is driving growth. The market’s standard plan also now allows for rate adjustment based on age.
Experts said New Jersey’s early experience with reforms was the most appropriate time frame for assessing Verrilli’s statement. By that account, his figures are roughly correct.
But is Verrilli right to claim the guaranteed coverage and cost provisions sparked enrollment decline and rate increases?
Health care experts acknowledged that other factors, such as a vibrant economy and loss of subsidies, may be involved, but said Verrilli’s overall point is strong.
"Without a coverage mandate the guaranteed issue and modified community rating provisions had the effect of encouraging sick people to purchase insurance and discouraging well people from purchasing insurance," which led to the rate increases, said John Jacobi, a professor of health law and policy at Seton Hall Law School
It’s worth noting that the average age and percentage of people who reported fair or poor health in the market increased for new enrollees from 1996 to 2002, according to a 2004 brief from Rutgers University’s Center for State Health Policy.
Alan Monheit, director of the Center for Health Economics and Health Policy at UMDNJ said, "the statement is generally correct that without a mandate and with guaranteed issue and community rating that is certainly going to contribute to a potential unraveling of specific health plans within a marketplace and perhaps even the market itself."
The solicitor general said after New Jersey adopted provisions guaranteeing health insurance coverage and controlling rates in the individual market without a mandate rates "doubled or tripled" and enrollment dropped from 180,000 people to 80,000 people.
Verrilli’s figures are roughly correct in the years before a modified plan was introduced that has since boosted total enrollment in the market.
Experts agree it’s fair for Verrilli to point to guaranteed issue and community rating as sources of the enrollment decline and rate increase, but acknowledged there may be other factors involved.
Overall, we rate Verrilli’s claim Mostly True.
To comment on this ruling, go to NJ.com.
U.S. Supreme Court, Transcript, March 27, 2012
Interview with Alan Monheit, professor health economics and director of the Center for Health Economics and Health Policy at the University of Medicine and Dentistry of New Jersey, March 28, 2012
Interview with Ward Sanders, president of the New Jersey Association of Health Plans, March 28, 2012
Interview with John Jacobi, professor of health law and policy at Seton Hall University School of Law, March 28, 2012
Interview with Joel C. Cantor, the director of the Center for State Health Policy and professor of public policy at Rutgers University, March 29, 2012
Email interview with Marshall McKnight, spokesman for the New Jersey Department of Banking and Insurance, March 30, 2012
Email interview from Tracy Schmaler, spokeswoman for the U.S. Justice Department, March 29, 2012
Rutgers Center for State Health Policy, Combining New Jersey’s Individual and Small Group Health Insurance Risk Pools, December 2011
Health Affairs, Community Rating And Sustainable Individual Health Insurance Markets In New Jersey, July 2004
America’s Health Insurance Plans, The Impact of Guaranteed Issue and Community Rating Reforms on States' Individual Insurance Markets, March 2012
State of New Jersey Department of Banking and Insurance, NJ Individual Health Coverage Program Buyer's Guide, accessed March 28, 2012
State of New Jersey Department of Banking and Insurance, Individual Health Coverage Program: Historical Comparison of Enrollment, accessed March 28, 2012
State of New Jersey Department of Banking and Insurance, What Is New Jersey Health Insurance Reform?, accessed March 29, 2012
Rutgers Center for State Health Policy, A Decade After Regulatory Reform: A Case Study of New Jersey’s Individual Health Coverage Program, November 2004
The Nelson A. Rockefeller Institute of Government, New Jersey Small Employer Health Benefits Program Field Research Report, accessed March 28, 2012
Rutgers Center for State Health Policy, Non-Group Health Insurance in New Jersey, July 2004
Blue Cross Blue Shield, 2014 Insurance Reforms under the Patient Protection and Affordable Care Act, accessed April 3, 2012
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