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Rick Perry's Refusal to Expand Medicaid Could Cost Businesses $400 Million

by: Emily Cadik

Mon Feb 03, 2014 at 02:30 PM CST

Rick Perry's resistance to expanding Medicaid is proving to hurt Texas in new ways every day. This time, it's related to massive employer tax penalties.

A new report from Jackson Hewitt finds that, "States that do not expand Medicaid for adults leave their large employers exposed to higher employer 'shared responsibility' tax penalties under the ACA." This will cost businesses between $1.03 and $1.55 billion in federal tax penalties each year in the 25 states that have not expanded Medicaid, starting in 2015.

In Texas, employers will have to pay federal tax penalties between $266 and $399 million annually - far more than any other state. Florida, which is positioned to be hit with the next-highest amount of penalties, would receive fines of up to $253 million at most.

Read more about why businesses will bear so much of the burden after the jump.

When the ACA became law, Congress planned for adults between 100 and 138 percent of the federal poverty line to be covered by Medicaid. But when the Supreme Court made the Medicaid expansion optional and red state governors jumped at the opportunity to opt out of any part of the ACA, the fate of the people who were supposed to be new Medicaid enrollees has become a troubling and costly predicament.

In Texas, over one million Texans are stuck in the Medicaid coverage gap - people whose incomes are too high to qualify for Medicaid but too low to qualify for subsidies. And it's now up to employers to cover them.  

If employers offer insurance that is not affordable to the group in the Medicaid coverage gap, they may have to pay up to $3,000 in federal tax penalties per employee. While the federal government would have paid 90 percent of costs of the Medicaid expansion, the burden for coverage is now falling on employers - and the price tag isn't cheap.

"A Texas solution to ensuring coverage through Medicaid impacts not only hospitals and patients but also employers who have a major stake in the wellness of their employees," John Hawkins, the Texas Hospital Association's senior vice president for government relations, said. "Developing solutions for the arduous task of improving access to health care coverage will continue to affect all aspects of the state's economy, including higher health insurance premiums for businesses and their employees."

Refusing to expand Medicaid isn't just terrible health policy. It's terrible economic policy, too.

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Force a tax to cover a program...make the tax optional...tax them for opting out. Call it terrible economic policy for opting out of the program and being forced to pay a tax.

Obviously nothing wrong with this great program & tax, however. Makes sense.

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