Staring down a $740 million budget shortfall, Colorado legislators are starting to think creatively about new ways to pay for high-cost programs like Medicaid. On Tuesday, a House committee advanced a proposal to use some large employers as a funding source.
Specifically, House Bill 1327 would require companies that have more than 500 part-time workers receiving Medicaid benefits to pay $2,300 to the state for each of those employees on the public health-insurance program for low-income individuals. That is equal to half of the $4,600 average cost of each of the 1.18 million Coloradans on Medicaid, explained sponsoring Rep. Lisa Feret, D-Arvada.
The proposal, which is expected to bring in about $85 million during its first full year of operations, would assess the cost as a fee on eligible employers and put the revenue toward the new Large Employer Health-Care Support Enterprise. Structuring it as an enterprise with a direct nexus between the fee and the services it supports rather than as a tax avoids the proposal running afoul of the Taxpayer’s Bill of Rights, Feret argued to the House Health and Human Services Committee.
Because so many working adults without disabilities are on Medicaid — 317,184, according to a Colorado Legislative Council analysis using state data — the companies that employ the largest number of them should help fund the benefits, Feret said. And requiring the biggest employers to pay millions or tens of millions of dollars to offset the public benefits their workers get will make them rethink whether they should just offer those employees private health insurance instead, she and other supporters said.
Medicaid benefits being limited
The bill comes as the federal government will begin requiring re-enrollment every six months for working-age Medicaid recipients next year and make them prove that they are looking for jobs — changes expected to shift millions of people nationally off the public program. Also, Gov. Jared Polis, needing to close a substantial budget shortfall, has proposed limiting the growth of Medicaid spending next fiscal year by doing things like cutting provider reimbursements and requiring prior authorization for some services.
“HB 1327 is a timely and balanced solution,” said Amanda Boone, cofounder of CF United, an advocacy organization for cystic fibrosis patients, many of whom are on Medicaid and fear the impact of the coming federal and state cutbacks. “It requires large employers either to provide health insurance or contribute to the care their workers receive.”
Business groups, however, said that the proposal runs afoul of federal and state law in several ways. And they warned that it could have unintended consequences that could lead to a loss of jobs in a state that already is experiencing some of the slowest employment growth in the nation.
Trey Rogers, who served as chief legal counsel for former Gov. John Hickenlooper and now represents the Colorado Retail Council, noted that a federal appeals court struck down a similar law in Maryland because it violated the Employment Retirement Income Security Act (ERISA) by seeking to force large employers to offer insurance benefits.
Does bill violate TABOR?
Rogers also argued that because the new enterprise would fund Medicaid — a state-government program that now is funded significantly by general-fund revenues rather than fees — it can’t be considered an enterprise. Also, enterprises must be set up as offering a service that fee payers voluntarily choose to get, and the fact that this enterprise would assess fines of $2,300 per Medicaid-beneficiary employee to anyone who doesn’t pay the fee shows there is nothing voluntary about it, he added.
Colorado Retail Council lobbyist Katie Wolf also questioned why a limited number of companies — Feret earlier told The Sum & Substance that she expects only a dozen employers will be subject to the fee — must fund the new enterprise. The bill exempts franchisees, nonprofits, public employers like government agencies, companies that have collective bargaining agreements with unionized employees and anyone who provides broadly defined “affordable” health insurance to everyone working 20 hours per week.
Wolf earlier had noted also that some workers, particularly those with costly medical conditions, seek part-time jobs that pay just enough that they won’t become ineligible for Medicaid benefits. Those workers could be at risk of losing their jobs and their streams of income if companies cut part-time workers rather than choose to pay the fees.
Will bill hurt Colorado business atmosphere?
This proposal is under consideration after Colorado ranked 46th in the United States last year for employment growth as businesses reel from increased regulations and fees, noted Parker White, executive director of the Colorado Competitive Council. And it’s up for debate as companies are reporting in surveys that they are choosing to expand in other states or leave Colorado altogether because of the rising cost of living and doing business here, said Meghan Dollar, senior vice president of government relations for the Colorado Chamber of Commerce.
“Feeing — or, in this case, taxing — Colorado businesses is not the way to solve Colorado’s budget crisis,” Dollar said. “Companies are already leaving the state, even without Colorado being the only state in the nation to fine or tax employers to help fund Medicaid.”
But Democrats on the committee advanced HB 1327 on an 8-5 party-line vote to the House Finance Committee after patient advocates talked about the need to either stop cuts to Medicaid — or even better, to move people off of Medicaid onto private insurance.
Boone said that cystic fibrosis patients are “terrified” of the combined effects of federal and state Medicaid cuts because they don’t know if they’ll be able to continue getting life-saving services from the depleted program.
Could bill get employers to insure more part-time workers?
Lindsay Compton, who operates a small dental practice in Arvada, said that as Medicaid benefits decrease, fewer of her fellow practitioners are accepting the public insurance program, making it harder for patients to access care. Pushing large companies to either boost Medicaid funding via a program that will increase Medicaid reimbursements or to give private benefits to their workers will open a lot more doors for lower-income Coloradans, she said.
Several people expressed frustration that high-earning companies choose to pay their part-time staffers so little that they receive public benefits, and, in some cases, even offer Medicaid application forms as part of their onboarding. Those firms need to be required to supplement the government-subsidized care that their workers are getting, argued Bridget Dandaraw-Seritt, founder of Advocates for Compassionate Therapy Now, which helps medically complex patients access therapy.
Feret earlier identified the companies she feels would have to pay the proposed new fees: Amazon, Dollar Tree, Express Employment Professionals, the JBS USA plant in Greeley, Lowe’s, Natural Grocers, Ross, Target, The Home Depot, TrueBlue, Walgreens and Walmart.
“I think they need to pay for their share,” Rep. Sheila Lieder, D-Jefferson County, said before supporting HB 1327. “They make billions and billions of dollars.”
Changes to Medicaid fee bill
While Feret originally considered making the companies pay a portion of the SNAP benefits that their part-time workers receive to help purchase food, she decided against including that provision in the bill. She also made several changes to the bill Tuesday, removing contractors from the list of workers whose benefits employers would be responsible for helping to pay and removing a clause that any revenue above a certain cap would go to the general fund.
The fees, if passed and signed into law, would not take effect until August 2028. Thus, any efforts that legislators make to impact Medicaid for next fiscal year’s budget must be done independently of this proposal.
“This is a new approach, a new way to tackle an issue,” Feret said. “And I think we’re on the right track.”
While advocates said other states have taken similar approaches, opponents pushed back on that claim.
They noted, for example, that courts struck down a Maryland program that would have instituted a fine on large employers not offering insurance to all workers. And while Lieder argued that a Vermont program does essentially the same thing as HB 1327 proposes, Rep. Dusty Johnson, R-Fort Morgan, noted that program only requires employer payments for workers who have no insurance, not for workers on Medicaid.