Study: Texas Employers Pay the Price for Failure to Expand Medicaid

Texas will be among a handful of states whose employers will be subjected to an estimated $266-$399 million in annual federal tax penalties due to the state’s decision not to expand Medicaid, according to a study released Wednesday. The state’s failure to extend Medicaid coverage to the working poor or devise its own solution to reduce the number of uninsured leaves more than one million Texans with no access to affordable coverage options. 

The study conducted by Jackson Hewitt Tax Service showed that states refusing to expand Medicaid for adults leave their employers exposed to “shared responsibility” tax penalties under the Patient Protection and Affordable Care Act. Under the reform law, certain employers are assessed a penalty if their employees rely on premium assistance tax credits to purchase insurance coverage but not if they qualify for expanded Medicaid coverage.  PPACA requires employers with 50 or more full-time employees to pay up to $3,000 in federal tax penalties for each full-time employee purchasing coverage with premium subsidies before reaching a cap.

The PPACA extended health coverage to millions of working poor through Medicaid eligibility revisions, but the U.S. Supreme Court made that aspect of the law optional for states. 

“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,” said John Hawkins, THA senior vice president for government relations. “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.”

Meanwhile, this population of uninsured patients will continue to require care amid ongoing and new federal funding cuts that affect each Texas hospital’s ability to provide the highest quality care to patients.

• Hospitals already provide more than $5 billion annually in uncompensated care because of Texas’ high rate of uninsured. 
• Reductions in Medicare Disproportionate Share Hospital payments began in FY 2012 and for FY 2014 alone are between $16 million and $19 million.
• The recent congressional budget deal will extend federal cuts to the Medicaid Disproportionate Share Hospital program that were intended as “pay-fors” for Medicaid expansion for an additional year through 2023.
• The budget deal also extends the two percent sequester reduction in reimbursement rates for Medicare providers (including hospitals) for two additional years from 2021 to 2023.
• The three-month SGR or “doc fix” will avert deep cuts to physician reimbursement but contains substantially lower payments for long-term care hospitals that serve patients with clinically complex conditions.