On May 1, 2018, the Governor of New Jersey signed into law the New Jersey Health Insurance Market Preservation Act (the “Act”).  The new law applies at the state level to all New Jersey residents and requires individuals to gain health insurance coverage that qualifies as minimum essential coverage or pay a tax penalty.  This legislation was enacted on the heels of the Tax Cuts and Jobs Act, which repealed the federal individual mandate penalty beginning in 2019.  The goal of the Act is to incentivize coverage and mitigate any substantial increase in premiums over the next several years.  The revenue collected from the tax will be used to fund a state reinsurance program, the New Jersey Health Insurance Premium Security Fund, if and when the program receives federal approval.  New Jersey joins Massachusetts, who previously enacted a similar mandate.  Vermont has also enacted a similar mandate, though it is not set to take effect until 2020.


When does the New Jersey law take effect?

January 1, 2019


What is the potential penalty? 

The tax penalty mirrors the previously enacted penalty under the Affordable Care Act.  Individuals will face an annual penalty of 2.5% of household income or a per person charge, whichever is higher.  The maximum penalty will be equal to the annual cost of the state average premium for bronze-level plans.  The per person penalty will be $695 (adjusted for inflation), half the amount per child, capped at $2,085 (three times the threshold regardless of family size and adjusted for inflation).


Are there exceptions?

A program will be established to determine whether an individual qualifies for an exemption from the mandate based on a hardship or religious belief.


Employer Action Item:

While still unclear, there may be additional New Jersey state filing requirements for employers as it relates to health coverage offered to New Jersey residents.


The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.

Joanna Castillo– Joanna is the Client Compliance Manager for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Joanna enjoys live music, college football, travel, and walking her dog in Golden Gate Park.