I have pointed to New Jersey as a real life example of what can happen when insurance reforms take place but there is no incentive for consumers to buy it until the day they need it.
In 1992, New Jersey passed health insurance reform that required insurance carriers to either offer individual health insurance on a guaranteed issue basis or pay an assessment to carriers that did. Other elements of the legislation were:
- Guaranteed coverage and renewability for all eligible people regardless of their health status. A pre-existing condition exclusion does allow insurers to limit coverage during the first 12 months (a limitation which is not contained in the Affordable Care Act).
- Guaranteed renewal of policies, provided (1) the insured does not become eligible for coverage under a group plan; (2) premiums are paid in a timely fashion; and (3) no fraud is committed by the insured.
- Community rating of the premiums, with variation allowed only for family status (single, adult plus child, husband and wife, and family). (The Affordable Care Act allows rate variations of up to three times from young to old.)
- Standardized insurance plans, referred to as Plans A, B, C, and D (indemnity options) and a single HMO plan.
New Jersey does not have a individual mandate or any other means to encourage participation in the health insurance pool.
What does the health insurance market look like today in New Jersey?
First, there are relatively few insurance plans participating in the New Jersey insurance market. According to the New Jersey Department of Banking and Insurance, if you want to buy a two adult plan with a $2,500 deductible and 80% coinsurance for example, there are only three carriers offering it. Aetna at $4,913 per month, Celtic at $12,322 a month, and Horizon a $6,127.78 per month. These rates do not vary by age.
You can buy a $2,500 deductible, 80-20 coinsurance plan for a family. Only one health plan, Oxford, offers it and it is age rated. If you are age 25, it will cost $2,498.20 a month, at age 40 it will cost $2,978.75 per month, and at age 60 $4,054.97 per month.
The cheapest family plan I found on the state site is a Horizon plan with a $10,000 deductible that costs $1,434.72 a month--$17,217 a year. The cheapest HMO plan was a Horizon plan for $1,546.08 a month--$18,500 per year. Although, the state does also offer very limited and scheduled benefit plans that cost as little as about $600 per month.
You can see the complete chart of rates at the New Jersey state website by clicking on the icon: "See Monthly Rates for All Standard Plans."
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