Arkansas businesses could be saddled with up to $38 million in fines if state lawmakers don’t expand Medicaid, according to a national tax service’s report.
But Arkansas’ novel plan to cover more poor Arkansans with private insurance instead of with an expansion of the existing $5 billion Medicaid program will not trigger fines for businesses with 50 or more full-time employees.
That plan - first floated by Republicans and since championed by Gov. Mike Beebe - seeks to cover up to 250,000 Arkansans through new, online health-insurance markets instead of expanding Medicaid, which already covers about 780,000 people.
In the past week, many larger businesses have queried state Surgeon General Dr. Joe Thompson on the possibility of being fined if the lawmakers sign off on the plan to funnel the newly eligible Medicaid population through the state’s health-insurance marketplace known as an exchange.
The answer is simple, he says. It’s no.
If the “private option” plan succeeds, Thompson said, Medicaid dollars will pay the premiums for the newly eligible poor. Because these individuals would not use the federal tax credit that would otherwise help them pay for insurance premiums, the penalties on their employers would not be triggered.
Still, one first-term Republican senator says his opposition to expansion hasn’t changed. Indeed, he said, businessmen in his Northwest Arkansas district have urged him to lighten their unemployment-benefit burden as a way to counteract any tax penalties they would face.
“I ran my campaign opposing Obamacare, and that’s what my constituents want. I will not vote for expansion,” said Sen. Bart Hester of Cave Springs. “Businesses understand it will be hard for them with the fines, but they’re not encouraging me to vote for it.”
The Jackson Hewitt Tax Service released the state-by state breakdown this week using U.S. Census Bureau data to determine that Arkansas businesses could face between $26 million and $38 million in fines if 12,784 people who would be eligible for subsidies on the state’s health-insurance exchange took those tax credits.
The report finds 30,541 Arkansans whose incomes fall between 100 percent and 138 percent of the federal poverty level, or individuals earning between $11,170 and $15,415 a year. But the study notes that not all of those adults work at larger businesses that would be subject to the penalties. It also assumes that almost all the companies would offer some health coverage that could reduce or eliminate the federal fines.
Under the federal Patient Protection and Affordable Care Act, companies with 50 employees or more face fines ranging from $2,000 to $3,000 for most employees who gain coverage on the exchange either because their companies don’t offer insurance or it’s deemed too expensive by the law. Such employees would apply for a tax credit. But under the plan Arkansas is pursuing, no tax credit would be sought because Medicaid money would be paying for the insurance.
Hester said gas-station owners, restaurateurs and other large low-wage business owners have come to him asking for a financial offset to those fines. He’s filed Senate Bill 875, which would reduce state unemployment benefits from 66.6 percent to 60 percent of the state’s average weekly wage and set a maximum cap at $325 a week.
“It’s just a different answer to the problem [created by the Affordable Care Act],” Hester said.
Hester plans to run the bill next week in the Senate Public Health, Welfare and Labor Committee.
Another first-term GOP senator and member of the Senate Public Health, Welfare and Labor Committee, Ronald Caldwell of Wynne, said he is “leaning” toward supporting expansion, in part because of the costs to business.
“All of that factors in,” Caldwell said.
Hospital administrators have talked with him about the economic benefits of expansion, he said. And the potential costs if it fails.
Plus, Caldwell’s wife works for a Forrest City hospital.
“I don’t want to put her job at risk, but I don’t want to bust the state budget either,” Caldwell said.
He wants to further study the details of the Affordable Care Act and see the federal guarantee of Arkansas’ plan before he makes up his mind.
Businesses are very worried about potential penalties related to the new health-care law, said Randy Zook, president and chief executive of the state Chamber of Commerce.
Zook’s group hasn’t taken a position on Medicaid expansion. But he said he’s pleased with the bipartisan work that has begun since Beebe returned in late February with the unprecedented Obama administration deal for using the insurance exchange to absorb additional Medicaid coverage.
“I think everybody is trying to let the course run. Try to let them do their job. The process has been pretty darn effective,” said Zook.
The state constitution requires supermajorities to approve most appropriations: 75 votes in the House and 27 in the Senate.
Once businesses run the numbers, they come to realize that Medicaid expansion is good for their bottom line, Thompson said.
“I’ve yet to find one who hasn’t reached that conclusion. Expansion is in their economic best interest,” Thompson said.
Yet few if any business leaders have openly lobbied for expansion at the Capitol, where the debate has loomed large in the past few weeks. Thompson thinks their previous opposition to the health-care law has created a reluctance to publicly reverse course.
Business voices would be welcome as the Legislature enters the final month of the regular session, said Matt DeCample, Beebe’s spokesman.
Early next week, the Department of Human Services is expected to release revised estimates on the costs and benefits of the new expansion plan.
“The more vocal support out there, the better,” DeCample said.
Front Section, Pages 1 on 03/16/2013