States That Do Not Expand Medicaid Will Expose Employers to Higher “Shared Responsibility” Payments

A recent report published by the tax service company Jackson Hewitt, concluded that states that do not expand their Medicaid programs will expose employers in those jurisdictions to higher “shared responsibility” payments under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). The report stated employers in the 22 states that oppose or remain undecided about Medicaid expansion face costs ranging from $876 million to $1.3 billion for each year they do not expand. The states that are resisting expansion include: Alabama, Alaska, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Maine, Mississippi, Nebraska, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia, Wisconsin, and Wyoming.

The Jackson Hewitt report concluded that generally employers will not face penalties because their employees enroll in Medicaid; however, because of PPACA’s “shared responsibility” provisions, employers that offer health coverage and have 50 or more full-time equivalent employees must pay up to $3,000 penalties for each employee who enrolls in the premium assistance tax credits. The “shared responsibility” provision caps employer’s total liability at approximately $2,000 times the number of employees. The reported noted that in the states that try to constrain Medicaid cost growth in and beyond 2017, the constrains may boomerang because not expanding Medicaid, may lead to higher net taxes for employers starting in 2014 due to the “shared responsibilities” provisions.

The report used current data from the Current Population Survey, based on recent census data to estimate the number of uninsured adults working full time under the age of 65 by state who are between 100 to 150 percent of the federal poverty level (FPL). The report estimated approximately 1.01 million full-time uninsured employees under age 65 could enroll in the premium assistance tax credits; and if 100 percent of these employees were to enroll and no state were to expand Medicaid, collective employer liability per year under the “shared responsibility” provisions would range from 2-3 billion dollars. The report excluded employees who are currently insured. Current data estimates there are approximately 2.4 million adults aged 19-64, working full-time, who are between 100 to 150 percent FPL and have employer-sponsored health insurance. The report concluded that any projections of the “net” costs of Medicaid expansions should include costs of liabilities to employers in any particular state.