Employer fee for workers on Medicaid may backfire, analyst warns

A New Jersey law intended to shift health-care costs to some employers may have unintended negative consequences, according to a Trenton-based public policy analyst.

The policy, signed by Gov. Mikie Sherrill, is designed to help the state offset rising Medicaid costs by requiring certain employers to pay a fee tied to their workers’ enrollment in the taxpayer-funded public health care system. The legislation applies generally to those with high numbers of employees on Medicaid. Similar policies in other states are intended to encourage employers to offer more comprehensive health coverage and reduce reliance on publicly-funded care, while generating revenue to support Medicaid.

Peter Chen, senior policy analyst at New Jersey Policy Persepctive, said the initiative may not be successful. It may discourage workers from enrolling in Medicaid or incentivize businesses to restructure their workforce to avoid the fee, he said.

“We remain concerned that there are some unintended consequences of what sounds like a good idea,” Chen told NJ Spotlight News.

A bigger issue, he said, is an expected loss of Medicaid coverage for as many as 350,000 enrollees.  “We’re going to be losing people off of Medicaid because of changes in federal law.”

The employer fee was among the bills passed to support the $60.7 billion state budget for the fiscal year that started on July 1.

“This budget took an important step towards bringing the state closer to fiscal stability while continuing to support programs that help everyday New Jerseyans,” said Chen, whose group studies government spending and other policy. “The expansion of the child tax credit, the expansion of funding for the deportation and detention defense initiative, as well as much-needed reforms to Stay NJ and to some corporate tax loophole closure has helped to keep the state in more fiscal balance moving forward.”

Chen, though, criticized the process for $360 million in supplemental spending approved alongside the budget. Some costs, including FIFA World Cup-related spending, should have been part of the budget debate, he said.

“Why is it coming in the supplemental and not in the original budget?” Chen said. “Maybe we should be thinking about what the supplemental appropriation looks like before the end of June, closing out the whole year.”

Chen said the state’s cash reserves would not be sufficient to protect the state in a recession.

“We were at $10 billion a few years ago. Now we’re down to $6 billion,” Chen said. “We still have a structural deficit, which means we have more expenditures than we have revenues. That means that number is going to keep getting smaller unless we’re able to close that.”

The state should look more closely at corporate tax loopholes and tax credits, he said.

“Closing those corporate loopholes to make sure companies actually pay what they are supposed to pay based on the profits they’re generating is going to be particularly important as the economy gets more and more concentrated in a small number of companies,” Chen said.