New Jersey just flipped the script on who bears the cost of health coverage for hundreds of thousands of low-income workers. Gov. Mikie Sherrill signed legislation late Tuesday night that will bill companies with 50 or more employees on Medicaid. The fees start at $325 per person annually and climb to $725. The state expects to collect $145 million this fiscal year from the program alone.
States Test New Tools to Offset Federal Pressures on Medicaid Funding
But the move reaches far beyond Trenton. Democratic leaders in California, Connecticut and elsewhere eye similar steps. They face mounting budget gaps after last year’s federal tax and policy law. That measure, signed by President Donald Trump, introduces work requirements and stricter eligibility checks. The Congressional Budget Office projects more than 10 million people could lose insurance by 2034. States anticipate higher per-person costs as enrollment shifts.
Sherrill pitched the idea in her March budget address. “Instead of asking taxpayers to foot that bill, this budget looks to large employers,” she said then, according to the New Jersey Monitor. The bill cleared the Assembly 48-22 and Senate 22-15 along party lines. It forms part of a $60.7 billion spending plan for the fiscal year that began Wednesday.
Nearly 750 companies, nonprofits and government offices could face bills. A 2024 state Department of Human Services report identified them after reviewing three months of claims totaling $427 million. Amazon had more than 5,600 workers and 10,000 dependents on the program. Walmart topped 10,000. One food service firm counted 9,000. The fees apply to employees and their dependents. They exclude temporary, seasonal and part-time staff. Companies cannot base hiring or firing decisions on Medicaid status. Lawmakers added those protections to blunt criticism.
Proponents call it simple fairness. Small businesses often provide coverage and still pay taxes that support the public program. Large retailers and service companies do not. “This is called tax fairness,” Assemblyman Avi Schnall said during debate, per the New Jersey Monitor. “We’re getting the record straight.” State Sen. John Laird, a California Democrat who sponsored a related measure, made the same point. “If you’re a small business person in California, you are quite likely paying for health insurance for your employees. And through your taxes, you’re paying for health insurance for some of the biggest employers in California. And that’s not fair.”
California’s bill, passed this week, stops short of immediate fees. It orders the administration to study options and report back next year. Democratic candidate Xavier Becerra included the concept in his platform for governor. Connecticut Gov. Ned Lamont wants a version in his state’s budget two years out. Bills advanced in one chamber in Colorado and Oregon. Washington saw an introduction. Momentum builds. Yet success remains uncertain.
Business groups push back hard. The fees punish employers for choices employees make. Many workers decline company plans because Medicaid offers lower or no premiums. “The fact remains that many job-creators are still going to be penalized for something they have no control over,” Christopher Emigholz, chief government affairs officer at the New Jersey Business and Industry Association, said in a statement reported by Fortune. Walmart responded that it offers coverage and supports “fair solutions” without endorsing the fee.
Even some liberal analysts raise alarms. Gideon Lukens, health policy director at the Center on Budget and Policy Priorities, worries about unintended consequences. Companies might hire fewer low-income workers or single parents. They could factor Medicaid enrollment into layoff lists or location decisions. Employees might avoid signing up to stay attractive to bosses. “Usually, when I see a tax on something it’s going to discourage whatever being taxed,” he told Fortune.
The concept isn’t fresh. Massachusetts tried it in 2017. Employers paid up to $750 per nondisabled worker on Medicaid or a subsidized exchange plan. The surcharge expired after one year and was not renewed. Maryland targeted Walmart in 2006 with a similar law. A federal judge struck it down. The ruling said the measure forced different treatment of self-insured health plans in one state versus others. New Jersey’s approach avoids naming specific plans. It may survive legal tests.
Medicaid spending in New Jersey runs about $26 billion yearly. More than $7 billion comes from state coffers. Federal changes add pressure. The Trump-era law tightens documentation for work, school or volunteering. Most large-employer workers would keep coverage if they log 20 hours weekly. Still, administrative burdens and coverage losses loom. States scramble for revenue without broad tax hikes.
Republicans called the New Jersey bill an “ambush” on business and hospitals. One GOP lawmaker warned of job impacts. Policy analysts at the New Jersey Policy Perspective urged more equitable funding sources instead. They argue the fee could deter hiring from low-income households. The administration counters that exemptions and anti-discrimination rules limit damage.
Implementation details will matter. The state must identify affected workers accurately. It will bill companies once a year based on enrollment snapshots. Employers may challenge counts or seek exemptions. Administrative costs could eat into the $145 million projection. And if companies raise prices or cut hours to offset the expense, workers feel it indirectly. The fee becomes another line item in the cost of low-wage labor.
Watch California closely. Its study could produce a model other states copy. Becerra’s campaign elevates the issue. Lamont’s proposal in Connecticut signals Northeast interest. Even red states might study the approach if federal support shrinks further. The debate pits two powerful ideas against each other. Employers should cover their people. Taxpayers should not subsidize profitable corporations. Yet altering hiring incentives carries risk.
New Jersey steps first. Its experience will shape arguments everywhere. Success means stable funding and modest shifts in coverage. Failure brings lawsuits, lost revenue or reduced hiring. Either way, the conversation changes. Large companies can no longer assume public programs will absorb their lowest-paid workers without consequence. Small businesses gain an argument for level treatment. And millions of families stay in the middle. Their coverage now carries a price tag that employers must see.
So the experiment begins. Results will arrive in claims data, employment surveys and court filings over the next year. Other governors take notice. Legislatures draft variations. The pressure from Washington only grows. New Jersey didn’t invent the tension between private employers and public health programs. It simply decided to charge for it.
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