On Wednesday, May 30th, NJ Governor, Phil Murphy, signed into law a bill that will require all New Jersey residents to have health coverage or pay a tax (penalty), making NJ the second state to enact an individual health insurance mandate.
Massachusetts, the first state to enact such a mandate, began taxing its citizens in 2006, and their approach served as a model for PPACA (aka “The Affordable Care Act”). Massachusetts reports, as of the end of 2016, that 97% of its residents were insured for that year, and they had the lowest percentage of uninsured in the United States. By contrast, the US Census reflects that 92% of NJ residents were insured in 2016.
Meanwhile, NJ Democratic lawmakers drafted the bill, NJ A3380 (18R), in response to Congress’ decision to repeal the federal mandate established under the Affordable Care Act (ACA). The repeal, the New Jersey lawmakers feared, would drive healthier people out of the state’s Healthcare.gov marketplace and cause premiums to spike.
“The individual market would descend into a death spiral if not for this legislation,” said State Sen. Joe Vitale (D-Middlesex), the prime sponsor. “This helps to keep people insured and keeps that market healthier.”
Will Vermont join their ranks?
Vermont Gov. Phil Scott, a Republican, signed a bill on May 28th that would establish an individual mandate, but the details, including the financial penalty and enforcement mechanisms, will be determined during the 2019 legislative session. The Vermont mandate won’t go into effect until January 1, 2020.
When will this new tax (NJ Mandate) take effect? And, how much will it be?
The Mandate is really a tax and it closely mirrors the federal ACA tax structure. So, when a NJ resident files his/her state income tax return, the resident will owe a penalty for themselves, their spouse and each of their dependent children that is uninsured (or has coverage that doesn’t meet federal MEC (Minimum Essential Coverage) guidelines).
The tax will be the greater of:
New Jersey’s mandate is scheduled to take effect January 1, 2019, which gives state officials seven months to get the word out to residents about the new requirement.
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