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Thursday, January 23, 2014

Jackson Hewitt study: without private option, state businesses could face $27-40 million yearly in additional penalties

Posted By on Thu, Jan 23, 2014 at 4:46 PM

The Arkansas Chamber of Commerce yesterday released a press release trumpeting a study by Jackson Hewitt Tax Service that finds that Arkansas businesses could face penalties between $27 to $40 million per year, starting in 2015, if the private option is defunded. 

Jackson Hewitt's analysis looks at the impact of states' Medicaid-expansion decisions on businesses facing the Affordable Care Act's employer mandate. The federal healthcare law requires businesses with more than 50 employees to provide affordable and adequate healthcare, penalizing them with a "shared responsibility" tax if they don't. This mandate was delayed by a year and is currently set to go into effect in 2015. Because of a wrinkle in the law, businesses subject to the penalty could take a larger hit in states that decline to expand Medicaid. 

Here's the deal:  Medicaid expansion, including the "private option" version in Arkansas, covers people below 138 percent of the federal poverty level. Meanwhile, people between 100 percent and 400 percent of FPL are eligible for subsidies to purchase health insurance on the exchange marketplace. When many states chose not to expand Medicaid, it created a quirk in the law regarding folks in the 100-138 FPL group. If a state expands Medicaid, those folks go to Medicaid (or in the case of Arkansas, the private option); if a state refuses to expand Medicaid, those folks go on the marketplace, eligible for federal subsidies. Got all that?

What does this have to do with the employer mandate? Well, businesses that don't provide insurance are not penalized for employees who go to Medicaid/private-option, but they are penalized for employees who get subsidized insurance on the marketplace. So businesses in states that decline expansion will face a bigger hit, Jackson-Hewitt found. 

The Jackson Hewitt study, released this week, presents more or less the same findings as a similar study last year. This particular issue — framed as a "tax hike" by the Chamber and other proponents of the private option, including Gov. Mike Beebe — was cited by a number of Republican legislators I've spoken with as influencing their support for the private option last session. Private-option opponents point out that the employer mandate was already delayed a year, and perhaps it will be delayed again. I can't predict the future on that front, but if I was a business owner, I'd certainly be preparing for the mandate in 2015. 

Discussing this study on Twitter last night with a few Republican lawmakers and reporters, several suggested that there must be some way for the state to legislate around this other the private option. Sorry, but there's really not. This is a practical result of federal law. The only "Plan B" that would dodge the tax hit Jackson-Hewitt describes is traditional Medicaid. Without Medicaid/PO, the 100-138 employees will be eligible for subsidies on the exchange, subjecting businesses to penalties. It's as simple as that.  

Here's the Chamber's press release (which doesn't mention that the penalties begin in 2015, not this year): 

State Businesses Facing $27 - $40 Million Tax Increase If Medicaid Private Option Not Reauthorized

Arkansas businesses will face a substantial tax increase if the Arkansas Legislature backs away from the Private Option it put in place in its last session. Jackson Hewitt Tax Service estimates the added cost at $27 million to $40 million in a new study released recently. Click here for a full copy of the report.

“This additional expense will have a chilling effect on the growth plans of Arkansas businesses,” said State Chamber/AIA President & CEO Randy Zook. “With nearly 100,000 Arkansans still unemployed, those companies do not need to deal with added costs.”

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