What Gov. Baker's Medicaid Funding Plan Would Mean for Employers

Date: January 31, 2017

Governor Baker’s FY18 budget contained a new tax on employers to address increased spending in the Medicaid, or MassHealth, accounts, where enrollment has spiked 70% since 2007 and spending is doubled. Medicaid accounts for 40% of the state budget and it is crowding out other spending. Expanded eligibility guidelines for Medicaid under the ACA and generous benefits that many small businesses cannot match led to an increase in the number of workers who opted for MassHealth and other state subsidized programs instead of employer-sponsored insurance, which was not permitted under the state’s original healthcare law.

The proposed tax would affect companies with companies with 11 or more employees that either do not offer insurance or have less than 80% of their workers accept their qualified offer of insurance. For every full-time equivalent worker below the company’s 80% threshold that does not accept their employer’s qualified offer of health insurance or is not offered such a policy, businesses would pay $2,000 to the state. The tax applies whether workers access publicly subsidized insurance or are simply insured elsewhere through a spouse, child, Medicare, or veterans’ program. The budget proposal also institutes payment caps on high-cost healthcare providers, implements a moratorium on new health insurance coverage mandates, and provides more options for consumers through the state health exchange. But the tax comes now and the cost control measures may or may not offer savings in the future.

If the legislature includes the plan in its version of the FY 2018 budget, it wouldn’t be the first time employers have dealt with the similar mandate. As part of the employer mandate in Massachusetts’ 2006 healthcare law, businesses paid a $295 per worker “fair share” assessment if they didn’t provide health insurance. In addition to the currently proposed fee being $2000 instead of $295, employers in 2006 earned an exemption when 25% of their workers accepted their offer of insurance; the threshold is 80% now. The Romneycare employer mandate was repealed after the Affordable Care Act (ACA) took effect in 2013.

Small business owners did not create the state’s problems and can’t afford another mandate. NFIB/MA State Director Bill Vernon noted that the proposed tax would be a burden for many small employers, that policymakers shoulder much of the blame for the skyrocketing costs, and that the tax is only a temporary band aid not a solution as long as health care costs continue to increase and state subsidized programs attract workers.

Make sure you contact your elected officials to tell them how this tax will impact your small business using the NFIB Action Alert System! 

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