AURORA | Some large businesses in Colorado would be required to pay into a new state health care fund to support Medicaid services, under a bill passed by a House committee on Tuesday.
That fee would ultimately support the state’s struggling Medicaid program and increase reimbursement rates for providers, as state policymakers struggle to keep up with rapidly increasing costs for the safety-net health insurance program.
House Bill 26-1327 would require businesses that employ more than 500 people to pay $2,300 for each employee who is enrolled in Medicaid and works more than 20 hours per week. In her research on the topic, bill sponsor Rep. Lisa Feret, an Arvada Democrat, said she learned that big-box retail stores like Target and Walmart tend to have higher numbers of employees on Medicaid.
“The trends were pretty clear that there is a growing movement towards more of a part-time workforce, in which these employees can utilize our Medicaid system to get health care, rather than through their employee sponsored health care,” she told members of the House Health and Human Services committee.
“Colorado taxpayers should not subsidize the nation’s largest corporations by way of our state providing Medicaid for their employees,” she said in a statement.
The bill passed on a party-line vote and will next head to the House Finance Committee.
About 37,000 people are enrolled in Medicaid in Colorado and work for businesses that would be subject to the bill’s requirements, according to a nonpartisan fiscal analysis. It would bring in about $85 million in the 2028 fiscal year, the first year of its implementation. That would not be enough revenue to completely fill the $1.5 billion budget gap budget gap the state is facing this year, in large part due to rising Medicaid costs.
Enterprise funds do not count towards the state revenue limit subject to the Taxpayer’s Bill of Rights — the constitutional amendment that says the state can keep only a certain amount of revenue before returning it to the taxpayers — and lawmakers have relied on them to increase budget flexibility.
Employers that offer affordable health insurance options to that population of part-time workers would be exempt, as would franchisees, nonprofits and public employers. Supporters say it could be an incentive for those large employers to expand their health insurance offerings to part-time workers.
“It encourages large employers to either provide affordable health insurance or contribute to the cost of care their workers receive through Medicaid,” said Amanda Boone, co-founder of the cystic fibrosis advocacy organization CF United. “We believe it is a practical and reasonable approach to protecting Medicaid funding, and we believe that it will stabilize coverage, protect our vulnerable populations and support the healthcare system during a period of constrained public resources.”
The idea has taken hold in other states across the country. Massachusetts has an employer tax to help subsidize its Medicaid program, and New Jersey Gov. Mikie Sherrill proposed a $725 per-employee fee in her recent budget proposal. Washington lawmakers have a bill similar to Colorado’s in front of them, but it likely won’t pass this year.
Bill opponents include the Colorado Retail Council, Target, Home Depot and the Colorado Competitive Council.
“Medicaid costs are rising, and the state faces a real funding gap. But HB-1327 doesn’t solve that problem,” said Katie Wolf of the retail council. “lt shifts the cost of a public policy choice onto a handful of public or private employers, while exempting everyone else.”
Opponents also argue that the bill would violate the Employee Retirement Income Security Act, which governs standards for employee-sponsored health plans. They pointed to a 2006 district court decision that found ERISA preempted a similar Maryland law.
“This will be able to stand in court,” Feret told lawmakers. “The subject matter experts collectively have worked together to try to make it as legally sound as possible.”
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