Gov. Scott Walker’s recent decision to reject an expansion of federal funds for Medicaid in the state could cause Wisconsin employers to pay up to $36 million more in federal taxes next year, according to a new study by Jackson Hewitt Tax Service Inc.
Walker rejected expanding the state’s BadgerCare Plus health care program to the full limits called for and funded under the federal Affordable Care Act. The federal government plans to pay the largest share of expanded coverage through 2020, but Walker said he is not convinced the federal government will be able to sustain its share of the expansion.
The national study by Jackson Hewitt estimates that Walker’s decision could leave Wisconsin employers with federal penalties of $24.1 million to $36.1 million per year.
“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,” said Brian Haile, author of the report and first senior vice president of Parsippany, N.J.-based Jackson Hewitt. “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.”
Walker has proposed allowing extremely poor adults without dependent children to enroll in BadgerCare, while shifting those with somewhat higher incomes into a subsidized insurance marketplace, scheduled to debut in 2014.
People below 100 percent of the federal poverty level – $11,490 a year for a single adult – would be enrolled in BadgerCare. People with incomes above 100 percent would go into the federally subsidized marketplace.
By forcing those additional people to enroll into the exchanges, instead of covering them in BadgerCare, they will face additional costs in the form of premiums and deductibles, according to the report. And if they have a job, their employers might have to pay more as well, the report stated.
Employers with the equivalent of 50 or more full-time workers would pay a tax of between $2,000 and $3,000 per employee for anyone who receives a taxpayer subsidy to be covered in the federal exchange. In Wisconsin, that result to more than 12,000 people, Jackson Hewitt estimated.
From January 2014 through the end of 2016, the federal government covers the full cost for states of expanding Medicaid coverage for adults with incomes of up to 133 percent of the federal poverty level. Starting in 2017, the federal portion drops gradually, reaching 90 percent of its initial coverage to states by 2020.
“Paradoxically, state government efforts to constrain Medicaid costs growth in and after 2017 may lead to higher net taxes for employers in such jurisdictions beginning in 2014,” the report stated. “If a state foregoes the Medicaid expansion, then eligible employees between 100-138 percent FPL (federal poverty level) may enroll in the premium assistance tax credits. In such circumstances, their employers will face liabilities for the ‘shared responsibility’ tax penalties…”
To view the full report, click here.