Florida businesses have more at stake in the Legislature’s decision on Medicaid expansion than they might realize, tax-policy experts say.
Florida’s larger employers could face tax penalties of $146 million to $219 million a year if the state says no to federal funds and fails to cover low-income uninsured people via Medicaid, as called for in the Affordable Care Act, says tax-policy expert Brian Haile of Jackson Hewitt Tax Service.
His report is titled The Supreme Court's ACA Decision and Its Hidden Surprise for Employers. Its subtitle sums up the problem: “Without Medicaid Expansion, Employers Face Higher Tax Penalties Under ACA.”
The ACA requires employers with at least 50 workers to offer full-time employees health coverage, or pay the penalty. The penalty would be up to $3,000 for each employee who qualifies to buy federally subsidized health coverage through the ACA because they cannot get affordable coverage at work. Federal health officials call the penalty “shared responsibility.”
Haile writes, “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.”
Any cost-benefit analysis should take this into account, said Haile, senior vice president for health policy for Jackson Hewitt.
It does not appear that the Florida House has taken heed of the warning. It has been hardly mentioned in the debate.
What has dominated discussion so far is the federal funds offered to Florida, estimated at $51 billion over 10 years. The funds are estimated to cover 1.1 million of the state's uninsured.
The Senate is willing to take the money, if the federal government allows it to be spent as subsidies for private health insurance. The House is not. The two sides are so far apart that it seems possible there may be no resolution before the end of the session.
The penalty is among the reasons that the leaders of the state’s largest companies are pushing legislators to expand Medicaid and take the federal money. The penalty would come on top of a $1.3 billion “hidden tax” that businesses pay in higher health insurance costs to cover medical care for the uninsured, said Tom Feeney, president of the Associated Industries of Florida.
“The Jackson Hewitt study further demonstrates how Florida’s failure to take advantage of the tax dollars we’ve already sent to Washington will have greater consequences on hampering Florida’s future prosperity,” Feeney said in a statement to Health News Florida.
The ACA anticipated that all states would expand Medicaid to cover people with incomes of up to 138 percent of the federal poverty level (up to $20,839 for a couple, $31,809 for a family of four). The federal government will pay 90 to 100 percent of the cost of absorbing those people into Medicaid.
If Florida does not expand Medicaid, those workers between 100 to 138 percent of the poverty level would be able to buy subsidized policies through the health exchanges starting Jan. 1 under the ACA. That will cause penalties for their employers, Haile said.
Companies that pay relatively low wages are most vulnerable to paying the penalty.
“We are all aware of the employee mandate, and concerned about it,” said Kristen Knapp, a spokeswoman for the Florida Health Care Association, which represents nursing homes. “Any additional cost is going to be a challenge.”
But Florida nursing homes have remained neutral on Medicaid expansion. Knapp said the industry has higher priorities to push for, such as restoring past cuts to Medicaid payments.
Why has there not been more noise from the business community? Benefits experts said most companies do not feel they will be affected.
“All they have to do is make sure they offer affordable coverage and they won’t have to pay a penalty,” said Paul Fronstin, a health coverage expert at the Employer Benefits Research Institute, which advises the business community on benefits issues.
The Agency for Healthcare Research and Quality estimated that 97 percent of employers with 50 or more workers offered health coverage in 2011. The Jackson Hewitt study estimated that 91 percent of employers with low-wage workers offered coverage.
Some employers may prefer to pay penalties than offer health insurance to employees, Fronstin said.
“A $3,000 a year penalty may be less than they would pay for health insurance,” Fronstin said.
Other employers are taking steps to avoid the penalties.
Some hotels, for example, are now hiring only part-timers for most positions except top managers, because employers do not pay penalties for part-time workers, said Peter Ricci, head of the hospitality studies program at Florida Atlantic University hospitality and a director of Palm Beach County Hotel & Lodging Association.
“If they get everybody under 30 hours, they can get around the penalties,” Ricci said.
Last year, the Orlando-based Darden Restaurants (Red Lobster, Olive Garden) experimented with hiring only part-timers partly as a strategy to avoid the employer penalty, but abandoned the plan after it attracted negative publicity.
