Unanswered Questions on the new $200M Employer Health Care Tax

Employers in the Commonwealth are waiting for the state to release draft regulations this fall that will hopefully address the many unanswered questions surrounding the implementation of the new $200 million employer health care tax, set to kick in on January 1.  The Legislature and Governor Baker agreed to the temporary tax increase on employers to cover a budget shortfall in the state’s Medicaid program, known as MassHealth.  Governor Baker had also proposed a series of MassHealth and other private market reforms that the Legislature did not act upon, saying they needed more time to review the reform package and that they would bring their own cost saving reforms to the debate this fall.

The two-tiered tax increase will be imposed through the unemployment insurance tax system in changes to the existing Employer Medical Assistance Contribution (EMAC).  EMAC funds are used to pay for subsidized health care for low-income residents of the Commonwealth.  For all employers with 6 or more employees, the tier one EMAC rate will increase from 0.34% to 0.51% of annual wages, up to an annual wage cap of $15,000.  This equates to raising the maximum per-employee contribution rate from the current $51 to $77 annually.

The second tier of the tax increase will hit employers that have non-disabled employees who are on MassHealth or another state subsidized health plan.  Employers will be required to pay an additional 5% of annual wages for each employee on public coverage, up to the annual wage cap of $15,000, resulting in an annual maximum per employee contribution rate of an additional $750.

RAM has been raising questions to the Administration that we hope will be addressed in draft regulations to be released this fall.  Issues include part time, seasonal employees, and ensuring that multiple employers are not paying the tax on the same employee who happens to have multiple jobs.  How will the state handle any additional reporting requirements and how will an employer know who or how many employees they have on public health assistance programs?

The regulations are being drafted by the Division of Unemployment Assistance (DUA) within the Executive Office of Labor and Workforce Development (EOLWD).

Ballot Initiatives: $15 Minimum Wage / Paid Family and Medical Leave

Proponents of legislation to increase the state’s minimum wage to $15 per hour are also now collecting signatures around the state to place the issue before the voters in November of 2018.  The same group is also collecting signatures on a question that would mandate all employers in the Commonwealth to provide mandatory paid family and medical leave.  Both initiatives were filed earlier this year as legislation and both were recently heard before the Joint Committee on Labor and Workforce Development.  In testimony before the Committee, RAM argued against both proposals, citing that imposing higher labor cost on Massachusetts employers places them at a competitive disadvantage compared to out of state and online competitors at a time when health insurance premiums, unemployment taxes, and energy costs continue to skyrocket. 

Criminal Justice Reform / Larceny Threshold

 Criminal justice reform is also on the fall agenda, with the Senate expected to take a bill up in mid to late October.  The proposal includes provisions to phase out the indigent counsel fee, and to require frequent inmate reviews on the length of stay in solitary confinement.  The provision that is very troubling to the retail industry is the inclusion of an increase in the felony threshold for the crime of larceny from the current amount of $250 to $1,500.  At the current threshold level of $250, retailers already experience significant losses due to theft— costs which are shared with consumers in the form of higher prices.  RAM has argued that the provision is akin to a cost of living adjustment for criminals. 

 The Legislature will recess again from formal sessions on November 15th, returning in early 2018.