[Congressional Record (Bound Edition), Volume 145 (1999), Part 15]
[Extensions of Remarks]
[Page 20982]
[From the U.S. Government Publishing Office, www.gpo.gov]



  HELP FOR THE UNINSURED: THE LESSONS FROM NEW JERSEY: WHY H.R. 2185 
                           SHOULD BE ENACTED

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Wednesday, September 8, 1999

  Mr. STARK. Mr. Speaker, the July/August 1999 issue of Health Affairs 
contained an interesting article entitled, ``Hidden Assets: Health 
Insurance Reform in New Jersey,'' by Harvard professor, Katherine 
Swartz, and Brandeis professor, Deborah Garnick.
  The information in the article strongly supports passage of H.R. 
2185--a bill which gives people a refundable tax credit to buy 
individual health insurance through a community-rated, guaranteed-issue 
insurance pool.
  The article describes how, because of the collapse of the major 
individual insurer in New Jersey in 1993, the State came up with an 
Individual Health Coverage Program (IHCP). The key reforms of the IHCP 
are described below. The article concludes with the observation that 
the reforms themselves have not done much to help reduce the number of 
uninsured, because the cost of insurance is still too high for the 
working poor who constitute the bulk of the uninsured. But, says the 
article, if the New Jersey reforms were accompanied by a refundable tax 
credit system, it could make a major difference.
  What they are describing, Mr. Speaker, is H.R. 2185.

                        Overview Of The Reforms

       The IHCP reforms forced changes in five areas. (1) To 
     broaden the size of the potential market, insurers are 
     sharply limited in their ability to choose whom they will 
     insure. The regulations, require guaranteed issue and renewal 
     of policies, portability of coverage across carriers, and 
     limited to preexisting condition exclusions. (2) To encourage 
     indemnity insurance companies and managed care organizations 
     (hereafter collectively referred to as carriers) to enter the 
     market, all carriers selling health insurance in New Jersey 
     must either offer policies in the individual market or share 
     in the losses of carriers that do sell policies and incur 
     losses. (3) To give consumers more leverage in the market, 
     carriers in the market may only sell up to six types of 
     policies with standardized benefit packages, a 
     standardization that facilitates comparisons by consumers.
       (4) To extend access to higher-risk persons, the state 
     required carriers to use pure community rating in setting 
     premiums for the standardized policies; age-rating bands or 
     variations in premiums based on where a person resides in the 
     state are not permitted. In setting premiums, carriers also 
     are required to meet a minimum loss ratio, so that at least 
     75 percent of premiums are used for provision of services. 
     However, carriers do not have to seek approval from a state 
     agency for any changes in premiums that they might want to 
     implement, which we discuss in more detail below. (5) To 
     implement the IHCP and monitor industry compliance with the 
     regulations, the authorizing legislation called for oversight 
     by a board, which runs the program independently of the New 
     Jersey Department of Banking and Insurance. Four of the nine 
     board members are representatives of carriers and elected by 
     the companies.
       New Jersey's reforms are remarkable, particularly today, 
     when states are assumed to have little power to bargain with 
     corporations. In recent years mutual fund firms, automobile 
     factories, professional baseball teams, and many other 
     corporations have extracted large government concessions by 
     threatening to move elsewhere. Yet New Jersey imposed major 
     regulations and risk sharing on health insurers, with major 
     carriers taking a leadership role in the process.
       Additional efforts are needed to increase coverage. Even a 
     well-functioning individual health insurance market has 
     limits on what it can accomplish. The IHCP did not 
     dramatically raise the number of New Jersey residents with 
     individual coverage. Surely one reason more people have not 
     purchased policies is that the premiums are not affordable 
     for those with low incomes. The various congressional 
     proposals to provide tax deductions or credits might induce 
     some people to purchase individual policies who otherwise 
     would not, but for people with low incomes, other efforts 
     will be needed. The federal Earned Income Tax Credit offers a 
     model of how the federal government could issue a tax credit 
     that provides money during the year for the purchase of 
     insurance. Such an ``earned insurance tax credit'' also would 
     help to bring in younger workers, who typically earn low 
     salaries, and thereby increase the proportion of healthy 
     persons in each carrier's individual plans.
       Similarly, if the tax code were revised and incentives for 
     employer-sponsored coverage were replaced by tax credits for 
     individuals purchasing insurance, large numbers of people 
     would enter the individual markets. The result would be a 
     sharp increase in the proportion of healthy persons in the 
     individual markets. Either of these tax-induced increases in 
     the proportion of healthy persons with individual coverage 
     would lower the expected expenditures per insured person. 
     Competition among carriers in this expanded market then would 
     increase, keeping premiums close to costs.
       New Jersey's IHCP is a model for other states wishing to 
     increase access to health insurance via market-oriented 
     solutions that do not involve increased government financial 
     obligations. States have assets they can trade upon to force 
     competition in an expanded individual insurance market--a 
     factor that should be of greater importance in states' 
     strategies for increasing access to health insurance.

     

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