State lawmakers and Gov. Phil Murphy are expected to approve an assessment on health insurance premiums this week, with the projected $300 million in revenue that results to be used primarily for subsidies to help people afford individual health plans.

The 2.75% tax replaces a federal assessment created by the Affordable Care Act that phases out in January.

“Republicans are always talking about repeal and replace,” said state Sen. Joseph Vitale, D-Middlesex. “Well they repealed, or are going to repeal, this excise tax that supports the subsidies. We’re going to actually replace that.”

The recession caused by the coronavirus has swelled the number of uninsured New Jerseyans. Families USA estimates 124,000 workers in the state lost their health insurance between February and May due to job losses, bringing the uninsured rate for non-elderly adults in New Jersey to 13%.

“We believe that this is the right thing to do for our residents. And it is necessary for the current moment,” said state Banking and Insurance Commissioner Marlene Caride.

“It’s not lost on us we are still mid-pandemic, and health care affordability and access are key not only to our COVID response but to our COVID recovery,” said Shabnam Salih, director of the state Office of Health Care Affordability and Transparency.

Advocates for the plan say it will raise around $300 million. More than two-thirds of that would fund subsidies for people with incomes up to 400% of the federal poverty threshold to buy plans on the individual market. Another $75 million would fund a reinsurance program that helps insurers pay for unusually large medical expenses. Remaining funds could support small businesses.

State Sen. Gerald Cardinale, R-Bergen, said the bill can only make the health insurance problem worse.

“It’s almost ludicrous to believe that by taxing something we can ultimately reduce the rates,” Cardinale said.

Chrissy Buteas, chief government affairs officer for the New Jersey Business and Industry Association, said it doesn’t make sense to impose the tax when businesses are hurting. The cost will be passed on to businesses and perhaps to workers.

“Our businesses have been shut. We’re in the middle of a pandemic. We don’t want to see our health insurance premiums increase, and this will absolutely increase our health insurance costs,” Buteas said.

Laura Gunn, director of government relations at the New Jersey Chamber of Commerce, said the business community was told when the Legislature authorized the $9.9 billion in borrowing to support the 2020 and 2021 budgets that ensured there would be no new taxes this fiscal year.

“The legislation would create a tax, one small business owners and their employees simply cannot afford,” Gunn said.

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Harvey Mishkin, chief operating officer for Association Master Trust, one of two multiple employer welfare arrangements in New Jersey, said his MEWA’s assessment will go from $1.6 million to the federal government last year to probably $3.5 million.

He said the organization had been expecting an increase of close to 9% for 2021 that it would be closer to 12% if the assessment is approved.

“So it’s a tough road. That, of course, is before plan changes. Many times, when you face a significant increase like that, the only option is to decrease the level of coverage,” Mishkin said, saying increased deductibles, higher co-pays and more out-of-pocket costs would be likely.

Michael Symons is State House bureau chief for New Jersey 101.5. Contact him at michael.symons@townsquaremedia.com.

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