Reform of the Individual Insurance Market in New Jersey: Lessons for the Affordable Care Act

The individual health insurance market has played a small but important role in providing coverage to those without access to group insurance or public programs. With implementation of the Affordable Care Act (ACA), the individual market has attained a more prominent role. However, achieving accessible and affordable coverage in this market is a long-standing challenge, in large part due to the threat of adverse risk selection. New Jersey pursued comprehensive reforms beginning in the 1990s to achieve a stable, accessible, and affordable individual market. We review how adverse risk selection can pose a challenge to achieving such objectives in the individual health insurance market. We follow this discussion by describing the experience of New Jersey through three rounds of legislative reform and through the first year of the implementation of the ACA coverage provisions. While the New Jersey reforms did not require individuals to purchase coverage, its experiences with direct and indirect market subsidies and regulations guiding plan design, issuance, and rating have important implications for how the ACA may achieve its coverage goals in the absence of the controversial individual purchase mandate.