Gov. Bobby Jindal’s rejection of the federal Medicaid expansion could prove expensive to Louisiana businesses, according to a new report by a national tax service firm.
Collective tax penalties for Louisiana employers potentially could range from $51.7 million to $77.5 million annually, based on the analysis by Jackson Hewitt, a national tax accountants’ company.
A clause in the 2010 federal Affordable Care Act, known as Obamacare, penalizes some employers when their employees aren’t able to obtain affordable medical coverage through their company. The provision affects employers with 50 employees or more and sets out a maximum $3,000 per employee penalty.
The employers don’t have to pay the penalty if their employees qualify for Medicaid expansion coverage. States have the option of expanding Medicaid to cover adults with annual income up to 138 percent of the federal poverty level.
“If there’s that much money to Louisiana employers, that’s a reason to do Medicaid expansion in some way, shape or form,” state Senate Insurance Committee Chairman Dan “Blade” Morrish, R-Jennings, said Thursday. “We might as well not do tax reform because that does it right there.”
Morrish said he had just received a copy of the report and wants a nonpartisan review of it. He also said he would ship a copy to state health chief Bruce Greenstein, who has been Jindal’s point person on the Medicaid expansion issue.
Greenstein disputed the analysis.
He said the administration has not done any kind of study on the potential impact on employers of the decision not to expand Medicaid. “I don’t agree with their conclusion in the sense that they chose to base it on the absolutely worse case scenario, which I find disturbing. It doesn’t really contemplate how the real world works,” Greenstein said.
Greenstein said Jackson Hewitt is projecting that every employer with 50 or more employees will drop health insurance for that company and that every employee will get subsidized health insurance through the exchange market.
The potential for an employer penalty without Medicaid expansion came up during a meeting of the Legislature’s insurance committees on Wednesday. But no one put a number on the potential penalties to which Louisiana firms could be exposed.
Jindal is against the Medicaid expansion, which is estimated to provide insurance for up to 400,000 uninsured, contending the current federal program is broken and should not be replicated. He said there needs to be more flexibility to move to private sector health insurance. He also contends it would be too costly for the state — with the tab running in excess of $1 billion over a 10 year period.
The federal government pays 100 percent of Medicaid expansion costs of the program which begins in 2014 for the first three years. After that states would be responsible for no more than 10 percent of costs.
“In the 22 states that have opposed, are leaning against or remain undecided about expanding Medicaid, we predict employer shared responsibility costs could total $876 million to $1.3 billion each year,” wrote study author Brian Haile, Jackson-Hewitt’s first senior vice president for health policy. “As some states are still evaluating their participation, it is critical that any projections of the ‘net’ costs of Medicaid expansions also reflect the very real costs of the shared responsibility penalties to employers in any particular state.”
If a state foregoes the Medicaid expansion, then eligible employees can enroll in the premium assistance tax credits, he said. “In such circumstances, their employers will face liabilities for the ‘shared responsibility’ tax penalties,” Haile said.
On Wednesday, Petula Workman, Gallagher Benefit Services area vice president, said the rejection would translate into additional employer costs because of an Affordable Care Act provision dealing with “shared responsibility.”.
Then, Greenstein said, employers may take the tax penalty “because it could be far less expensive for the balance sheet” instead of providing insurance coverage.
Morrish said he fears a lot of employers don’t know about the potential impact the lack of Medicaid expansion could have on them.
“It could be a hidden cost to the employers that could make a big difference in this conversation,” he said.