Businesses set to face higher penalties if states don’t expand health coverage


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By Consumers Union on Tuesday, May 14th, 2013

In states that do not act to expand Medicaid or private insurance to low-income working people, businesses may be hit with higher employer penalties if they do not offer affordable health insurance to employees.

States like Florida and Texas are considering forgoing expansion, and hurting businesses in the process. Florida businesses could face increased employer penalties of $146 to $218 million each year. Texas businesses could face additional employer penalties of $299 to $448 million each year.

Under the Affordable Care Act, the federal government is willing to send taxpayer dollars back to the states in order to fund Medicaid expansion or certain private insurance options for low-income working people.

The ACA created a “shared responsibility” provision in which employers with more than 50 full-time employees may be penalized if they do not offer health coverage. These employers may face a $3,000 penalty for each employee who enrolls in the new health insurance exchanges and receives a tax credit.

When the ACA was written, it was assumed that any employee making less than 138 percent of the federal poverty level (FPL) could enter the Medicaid program. However, several states are now considering forgoing expanding Medicaid (or a private insurance alternative) to this population. This decision increases the potential for employers to face the shared responsibility penalty for not offering affordable coverage.

Here’s why: A portion of the people that would qualify for Medicaid under expansion will qualify for tax credits in the exchange if states do not implement Medicaid expansion or a private insurance alternative. This segment of the population is between 100 percent and 138 percent FPL. For a family of four, that equates to between $23,500 and $32,500 per year.

If states expand health coverage employers will not face a penalty if they do not offer affordable coverage to employees at these income levels. But if states opt out, then employers can expect additional penalties.

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