(FT) A leading business lobbying group in the US is appealing to the Obama administration to grant special relief to employers in states that are rejecting federal aid promised under the president’s health reform programme.
Under the 2010 Affordable Care Act, or “Obamacare” as it is known, states were required to expand Medicaid, the federally funded health insurance plan for the poor and disabled, with the federal government covering all costs for three years and the states paying about 10 per cent of costs after that.
But the Supreme Court said last year the state mandate was unconstitutional and gave states the right to opt out. So far, 14 have done so, meaning employers of low-wage workers in those states will either have to offer insurance plans to employees or face federal penalties.
In states that are not expanding Medicaid, employers will have to pay $3,000 for each employee who joins a state exchange programme to buy health insurance.
In a filing this month, the US Chamber of Commerce urged the administration to exempt employers in those states from the tax penalties.
In doing so, the chamber pointed to a decision by the Obama administration to exempt poor people in states that do not expand Medicaid from the “individual mandate”, which requires people to get health insurance or face an individual tax penalty. The chamber said the same approach should be used for employers.
“If an employer penalty is only triggered by a would-be Medicaid eligible employee, that trigger should be exempted or excused,” the Chamber of Commerce said.
A study by Jackson Hewitt, the tax preparers, has estimated the additional costs for employers in the 14 states that have rejected additional Medicaid funding – as well as for three states leaning toward rejection and five others that are undecided – could reach $1.3bn per year.
Federal tax penalties on employers in Texas alone, where Rick Perry, the governor, has opposed the expansion, could hit $450m a year, according to the study.
A spokeswoman for Mr Perry’s office did not dispute the potential impact on employers, but said Texas could not afford Medicaid expansion.
“This is not free money from the federal government – it’s either being borrowed from China or taken out of taxpayers’ pockets. The state and federal government can’t afford the current Medicaid program as is, and it’s financially irresponsible to continue expanding a programme that we know to be broken,” she said.
Most of the states that have decided against the expanded programme did not support Barack Obama in the 2012 election. The exceptions are Iowa, Maine, Pennsylvania and Wisconsin, where Republican governors say the Medicaid expansion is unsustainable.
“People have been focused on the stake that healthcare providers have, but it has been under-appreciated what a stake employers have as well in this decision,” said Larry Levitt, a Medicaid expert at the Kaiser Family Foundation.