- Posted by Jessica Waltman
- On August 17, 2020
On July 31, 2020, Governor Murphy signed a new 2.5% net premium tax into law. It will apply to fully-insured individual and large group health insurance policies sold in the state, beginning on January 1, 2021. The Murphy Administration hopes it will generate $220 million in new revenue annually, some of which they plan to use to fund the state’s share of its individual market reinsurance program. Other plans for the new revenue stream include enhanced individual market premium subsidies for consumers and other initiative boost individual market enrollment and lower costs.
While the tax itself is new, the lawmakers who proposed it view it as a replacement for the repealed federal health premium tax (HIT tax), which applied to all fully-insured coverage sold nationwide. That tax will end nationally on December 31, 2020, so it will not factor into premium costs any longer in most states. However, now, New Jersey’s individual market consumers, and employers that purchase large-group fully insured coverage, will have a new fee factored into their coverage costs to replace it.
Fortunately, a last-minute amendment to the legislation excludes small group market consumers. Another change halts the tax collection if the state does not use all of the funds collected according to set conditions. However, carriers will pass the 2.5% assessment onto consumers through higher premiums in the years to come.