Employers Could Face Fines if States Opt Out of Medicaid Expansion

Employers in states that opt out of the Affordable Care Act's Medicaid expansion collectively could be forced to pay as much as $1.3 billion in federal fines, according to a study by Jackson Hewitt Tax Service, Bloomberg reports (Wayne, Bloomberg, 3/13).

Under the ACA's Medicaid expansion, all U.S. residents with incomes up to 138% of the federal poverty level would have been eligible for Medicaid. However, the Supreme Court's ruling on the ACA stated that states could choose whether to participate in the expansion. For states that opt in, the federal government will cover 100% of the cost of the expansion until 2016, and after that the federal share will decline gradually until it reaches 90% in 2020 (California Healthline, 3/12).

Under the "shared responsibility" provision of the ACA, businesses with 50 or more employees must pay a fine for each employee who does not have access to affordable health coverage through the company and in turn qualifies for the law's health insurance exchanges.

Companies could be charged as much as $3,000 for each employee without affordable work-based insurance. For example, employers in Texas would be liable for fines of up to $448 million, while Florida employers could be on the hook for $219 million in fines.

Brian Haile, senior vice president for health policy at Jackson Hewitt, said, "A lot of businesses have taken the position that they oppose a Medicaid expansion because it would increase their taxes," adding, "The irony of this, or the paradox, is that the opposite may be true, at least for some businesses in the state" (Bloomberg, 3/13).

Safety-Net Hospitals in Opt-Out States Have Most To Lose

In related news, safety-net hospitals will be hit the hardest in states that do not participate in the ACA's Medicaid expansion, according to a separate report from Moody's Investors Service, Modern Healthcare reports.

Under the ACA, disproportionate-share hospital payments will be cut beginning in October. DSH payments compensate hospitals that provide care to a large number of low-income individuals. The ACA is expected to cut more than $17 billion from DSH payments through 2019, according to Moody's. The federal government also might extend the cuts as a strategy for reducing the budget deficit, the report adds.

Lisa Goldstein, associate managing director at Moody's, said that in the absence of DSH payments, safety-net hospitals will be left to rely on state funding or to pay for charity care costs themselves. Meanwhile, safety-net hospitals in states that do not expand Medicaid likely will see fewer insured patients. Goldstein said hospitals in such states will experience "a two-hit punch."

Hospital associations in states where the future of Medicaid is unclear -- including Florida and Tennessee -- have been lobbying for officials to accept expansion (Kutscher, Modern Healthcare, 3/14).