New Jersey Signs Law Charging Employers Per Medicaid-Covered Worker. Other States Are Watching.

New Jersey Gov. Mikie Sherrill signed A-5324/S-4533 into law this week, creating what the New Jersey Business and Industry Association is calling a "Medicaid tax" on employers.

The mechanics are straightforward. Any company with at least 50 full-time workers enrolled in New Jersey's Medicaid program — NJ FamilyCare — rather than an employer-sponsored plan owes an annual per-person fee. According to the New Jersey Business and Industry Association, the fee schedule runs $325 per employee for companies with 50 to 249 Medicaid recipients, $525 for those with 250 to 499, and $725 for those with 500 or more. The charge also applies to enrolled dependents.

The New Jersey Assembly passed the bill 48-22, according to NJBIA. The state budget Sherrill approved earlier in the week already counts on $145 million in revenue from the program in fiscal year 2027, according to New Jersey Policy Perspective.

The Political Logic

Democrats pushing the policy frame it as a fairness issue. The argument, made explicitly by California State Sen. John Laird in comments reported by WRAL, is that small businesses paying for employee health insurance are effectively subsidizing large employers whose workers land on Medicaid instead. "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," Laird said. "And that's not fair."

The policy is also a direct response to the federal budget law President Donald Trump signed, which the Congressional Budget Office projects will leave more than 10 million people without insurance by 2034, according to WRAL. States anticipating higher Medicaid costs and a shrinking federal share are hunting for revenue. More than 300,000 New Jerseyans are already at risk of losing Medicaid coverage under federal cuts, according to New Jersey Policy Perspective.

New Jersey is not alone. A bill passed this week in California directs state officials to develop options for a similar charge next year, per WRAL. The measure would fall to Newsom's successor. Democratic gubernatorial candidate Xavier Becerra has made an employer charge part of his platform. Legislation with similar intent cleared one legislative chamber each in Colorado and Oregon this year without making it to law. Connecticut Gov. Ned Lamont has called for the same approach in his state.

The Business Objection

NJBIA Chief Government Affairs Officer Christopher Emigholz put the employer case plainly: "If an employee declines an employer-provided health plan because they'd rather be on Medicaid, it is unfair to penalize the employer for that employee's decision."

Last-minute committee amendments carved out exemptions for part-time, seasonal, and disabled workers, which NJBIA acknowledged. But Emigholz said those carveouts don't solve the fundamental issue: companies can still be billed for choices their workers made voluntarily.

The concern is not just philosophical. If the fee makes hiring lower-wage workers more expensive, companies may respond by hiring fewer of them — which defeats the stated purpose of protecting those workers' coverage.

The Left's Objection

The business lobby isn't the only critic. New Jersey Policy Perspective, a left-leaning think tank, also opposed the measure. Policy analyst Jennifer Spiegel said the fee "risks discouraging Medicaid enrollment and pushing employers away from hiring lower-wage workers without addressing why health care is unaffordable in the first place."

Spiegel specifically flagged the inclusion of dependents, warning it "undermines New Jersey's progress in expanding health care access to children through the Cover All Kids initiative." Her argument: a parent who worries their employer will face higher fees because of the parent's child being on Medicaid may quietly drop that child from the program. The law raises money for Medicaid by potentially discouraging Medicaid use, a tension the bill's sponsors have not fully addressed.

Spiegel called on lawmakers to pursue "broader, more equitable revenue solutions that ask profitable corporations to contribute their fair share without putting low-wage workers at risk of losing coverage," though she did not specify what those solutions would be.

What the Fee Actually Covers

The fee is assessed on the employer, not the worker. Workers do not lose coverage under this law. But the downstream question of whether employers adjust hiring patterns, hours, or wages in response to the added cost remains genuine and unresolved. The CBO's projection that 10 million people will lose insurance by 2034 under the federal law is a national estimate, not a New Jersey-specific figure, and reflects work and documentation requirements, not this state fee.

The amended bill exempts part-time, seasonal, and disabled workers specifically because many lower-wage Medicaid enrollees fall into those categories. How much of the projected $145 million survives those carveouts in practice depends on the composition of the covered workforce. That number has not been independently verified against the amended bill's scope.

Heading into implementation, the key questions are whether New Jersey's $145 million projection is realistic given the exemptions, and whether Colorado, Oregon, and California produce enough political will to move similar bills across the finish line before their own budget gaps widen.