CNBC: Employers face tax hit in states with no Medicaid expansion

Benjamin Norman for The New York Times Patients at the Peekskill center, which may or may not get to keep a $4.5 million federal grant.
By:  | Health Care Reporter

The decision by 25 states not to expand Medicaid coverage under Obamacare could cost some employers more than $1.5 billion in new taxes starting next year, a new analysis reveals.

That tax hit might come as a shock to many of those businesses unaware of their exposure to the penalty—which will kick in if their employer-offered health plan is deemed too expensive and workers then buy private, subsidized Obamacare insurance.

“Paradoxically, state government efforts to constrain Medicaid cost growth in and after 2017 may lead to higher net taxes for employers in such jurisdictions beginning in 2015,” said the analysis by Jackson Hewitt Tax Service.

The reason is complicated, like much of Obamacare.

Jesper Elgaard | E+ | Getty Images

“There’s three words I use to describe this: esoteric, tedious and boring,” said Brian Haile, Jackson Hewitt senior vice president for health policy and co-author of the analysis entitled “State Medicaid Choices and the Hidden Tax Surprises for Employers.”

But it also is “incredibly expensive to get wrong or ignore,” he added.

How expensive for employers? Between $2,000 to $3,000 per worker.

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