It’s perhaps the biggest business bug-a-boo in Gov. Mikie Sherrill’s FY27 budget.
And the unintended consequences of a proposal to penalize employers with 50 or more workers on Medicaid seems to be growing the more the business community looks into it.
Call it the assessment of the assessment.
“We're putting this onus on employers who are already dealing with sky high increases in health care costs annually, while neglecting the many reasons their employees choose purposely to stay on Medicaid,” said NJBIA President and CEO Michele Siekerka.
“As such, this policy is basically anti-affordability. It unfairly penalizes many job creators who already provide robust benefits, will disincentivize lower-income workers, and overall is unlikely to get to the intended policy end.”
BUSINESS PENALTIES
Specifically, Sherrill’s plan is to raise $145 million by charging employers fees of up to $725 annually for every employee covered by Medicaid, or NJ Family Care.
The first-year governor said the funding is critical after a massive overhaul of Medicaid signed by President Donald Trump last July.
State health officials have forecasted the changes will eventually force more than 300,000 New Jerseyans off the plan and eventually cost the state $3.3 billion annually in hospital aid.
In his testimony before the Assembly Budget Committee this week, NJBIA Chief Government Affairs Officer Christopher Emigholz said the new business tax would impact about 750 employers.
“There are many employers that fall into this category, both public and private, that provide excellent health benefits but still have part-time and/or seasonal employees who are ineligible for health benefits or employees who decline health benefits,” Emigholz said.
“A very good question comes out of all of this is: How can an employer reasonably be penalized for not providing health benefits to an employee who only works a few hours per week or just a few weeks per year?”
WORKER IMPACTS
Siekerka added that many low-income and/or transient employees purposely choose Medicaid coverage over more costly health benefit plans provided by their employer.
“I speak every day to businesses that want to give more hours to the workforce so they can be eligible for employer-provided health plans,” she said. “I also speak regularly to those community providers who work closely with this employee population. What I hear from both is that many of these workers choose to stay on Medicaid because they're concerned about what happens if they leave the job, or they go somewhere else, that they're not going to be able to get back on it.
“In some cases, these employees may have difficulty working more hours due to childcare, transportation or other family challenges. They may have housing challenges and they’re stringing together a few part-time jobs for the flexibility.
“In many cases, it is not just about the employee themself. It is also the dependents they’re responsible for who are also on Medicaid. These are the realities we have to think about when imposing these fees on employers,” Siekerka said.
Even the think tank New Jersey Policy Perspective, which typically welcomes new taxes on business, has concerns about how the policy could impact workers.
“We think it’s well-intentioned,” NJPP Senior Policy Analyst Peter Chen said during a recent interview with Siekerka on NJ Spotlight News.
“But we're concerned about potentially discouraging companies from hiring people who are on Medicaid, as well as discouraging potentially people from using the state insurance program because they're worried that that might make them less employable.”
Both Siekerka and Emigholz also noted one other unintended consequence from the proposal: The Affordable Care Act (ACA) already has a federal “applicable large employer” mandate for employers of 50+ full-time equivalents (FTEs).
So, effectively, a state penalty that overlaps or conflicts with the ACA’s requirements risks duplication, complexity, and possibly legal challenges.
ANOTHER SOLUTION?
A bill has not yet been delivered to formalize Sherrill’s policy proposal.
Emigholz noted that Massachusetts had a similar Employer Medical Assistance Contribution (EMAC) Supplemental Assessment from 2017 to 2019.
“But problems with handling part-time and teen employees, plus employees declining benefits, were identified and it was discontinued,” Emigholz said.
Emigholz added that many companies may not even know how many employees are enrolled in Medicaid, making the financial impact difficult to calculate.
Overall, the most damning detail about the Medicaid tax proposal is that it serves as a strike against affordability, in a budget and an administration seeking to make New Jersey more affordable.
“We have seen employers offer health coverage where many working-poor employees decline those plans because their cost-share makes it less affordable to them,” Emigholz said. “At the same time, margin-focused employers faced with higher healthcare costs will likely pass those costs on to consumers.”
“It’s basically antithetical to any affordability agenda because many of the industries where affordability is a more common concern, like healthcare, grocery stores and childcare, are the industries that will become more expensive because of this new assessment,” Emigholz said.
Siekerka said the solution lies in a broader approach versus a targeted one against job creators who provide health benefits.
“Rather than a punitive assessment that will just continue to drive up costs for an already taxed business community, we should pivot to a comprehensive discussion about reform opportunities to drive the costs of healthcare down and provide incentives to the affected workforce who would then choose to get onto employer-sponsored plans.”
