Tax Penalties Loom for Employers in States that Decline Medicaid Expansion

Employers in states that decline to expand Medicaid may face tax penalties, a recent study revealed.

Employers face penalties that collectively could be as high as $1.3 billion per year, according to a recent study by Jackson Hewitt Tax Service. The penalties come in the form of “shared responsibility” payments for employees within certain income ranges.

As explained by Brian Haile,  Jackson Hewitt senior vice president for health policy, under the Patient Protection and Affordable Care Act (ACA) employees “between 100 percent and 138 percent FPL [federal poverty level] would be eligible for the premium assistance tax credits, but they will have to pay a monthly premium for coverage through a qualified health plan.” Employers will be charged a penalty of up to $3,000 for each employee who receives those tax credits, Haile states. That figure is capped “at approximately $2,000 multiplied by the total number of employees.”

According to Haile, “The associated costs to employers could total $876 million to $1.3 billion each year in the 22 states that have opposed, are leaning against, or remain undecided about expanding Medicaid. By way of example, the decision in Texas to forego the Medicaid expansion may increase federal tax penalties on Texas employers by $299 to $448 million each year.”