States considering charging employers with Medicaid-covered workers

Key Points:

• New Jersey has enacted a new fee targeting companies with at least 50 employees covered by Medicaid, charging between $325 and $725 annually per Medicaid beneficiary, aiming to raise $145 million this year to help fund the state’s Medicaid program amid rising federal costs.
• Other Democratic-led states like California, Connecticut, Colorado, Oregon, and Washington are considering similar employer charges to address increased Medicaid expenses due to federal policy changes requiring work or activity mandates for beneficiaries.
• Supporters argue the fee promotes fairness by having employers share the cost of Medicaid coverage for lower-income workers who benefit from taxpayer-funded health insurance, while opponents from business groups and some liberal organizations warn it could discourage hiring low-income workers and complicate employment decisions.
• New Jersey’s legislation includes exemptions for temporary, seasonal, and part-time employees and prohibits employment decisions based on Medicaid status to mitigate potential negative impacts on workers.
• Similar employer charges have been tried in the past in Massachusetts and Maryland but faced legal challenges or were not renewed; current proposals aim to avoid legal issues by not referencing self-insured health plans.