New Jersey health program may be in jeopardy, according to a new study

A state program that guarantees access to health coverage for all New Jersey residents regardless of their age or health status may be in jeopardy, according to a new study by The Center for State Health Policy (CSHP) at Rutgers, The State University of New Jersey.

The study, published in the July/August issue of Health Affairs, paints an uncertain future for the New Jersey Individual Health Coverage Program (IHCP), created by the state Legislature in 1993. In addition to ensuring access to health coverage for all residents, the program aimed to stabilize the financially precarious individual health insurance market and stimulate premium competition among insurers. The study found that despite positive early evaluations, several factors, including the state’s improved economy, jeopardize the sustainability of the IHCP.

“IHCP enrollment has declined by more than 50 percent since its peak in 1996,” said Joel C. Cantor, director of CSHP and a co-author of the study. Alan C. Monheit, a professor of health economics in the School of Public Health at the University of Medicine and Dentistry of New Jersey, was the principle author. Additional CHSP contributors were Margaret Koller and Kimberley S. Fox.

Cantor explained that until 1996, IHCP appeared to have achieved its stated goals, but beginning that year, enrollment in the IHCP declined while premiums rose. Only in recent months has the drop in enrollment abated, partly due to a cooling economy and some minor regulatory reforms.

The study points to several probable causes for the decline of enrollment in IHCP coverage. “The buoyant economy and tight labor markets in the mid- to late-1990s led many employers to offer coverage in order to attract workers,” Cantor said. During this period, New Jersey’s Small Employer Health Benefits Program (for groups of two to 50 workers) grew from 694,000 in 1994 to a peak of 938,000 in 1999. It stood at 884,000 in late 2001.

As enrollment in the IHCP declined between 1996 and 2003, premiums doubled or tripled, depending on benefit levels and plan designs. (IHCP enrollees are given a broad choice of health plans, including traditional indemnity plans and HMO coverage, with different co-payments.) The IHCP premiums examined in the study rose two to six times faster than premiums paid by employers in New Jersey during this period.

The study also documents a shift of enrollment among different types of plans offered in the IHCP during those years, driving up the cost of the most generous traditional indemnity plans the most. “As premiums rise, younger and healthier individuals seek entry to less expensive, more restrictive health plans that are unattractive to high risks,” Cantor said.” He added that it appears that many “low-risks” defected from the market altogether, leading to a drop in total program enrollment.

The research identified two other factors contributing to the IHCP decline.

New Jersey ended Health Access, a program that provided state subsidies for persons with low to moderate income to purchase individual health coverage. Also, several insurance carriers appear to have aggressively sought to attract enrollees by offering premiums well below cost with the hope of recovering losses from other insurance carriers, a practice that was permitted under the original IHCP regulations. This practice ended under revised regulations in 1998.

Despite the recent leveling off of enrollment in the IHCP, Cantor and his co-authors conclude the program may not be sustainable in the long term under current market rules. The authors point to several policy options, including offering premium subsidies for high- cost enrollees, permitting insurance carriers to charge lower premiums for younger enrollees and pooling the cost of IHCP enrollees with the small group market.