By admin 
Labor unions, health access and immigrant advocacy organizations celebrated when Gov. Gavin Newsom signed the Fair Share from Big Corporations Act into law last month. But some policy analysts worry the effort to make companies pay more toward their workers’ healthcare could unintentionally shift who and how they hire.
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The Department of Finance has until March 1, 2027, to develop a proposal requiring California’s largest corporations to help cover the cost when their employees rely on Medi-Cal, California’s version of Medicaid. One option on the table is a tax tied to the number of workers enrolled in the program, which is jointly funded by the state and federal governments.
The idea behind a per-employee tax is to give large employers a financial incentive to offer more affordable, comprehensive health coverage — or help pay for Medi-Cal when their workers rely on the state instead. Massachusetts briefly tried a similar approach beginning in 2018 and New Jersey is in the process of implementing its own version.
However, opponents argue individuals rely on public health insurance for many reasons, and tying a company’s costs to those workers could put them at a disadvantage.
“We don’t want to incentivize employers to change their business practices to either not hire people who are on Medicaid or discourage people from enrolling in Medicaid once they’re hired,” said Jennifer Spiegel, a policy analyst with New Jersey Policy Perspective.
NJPP supports requiring corporations to help fund public health insurance but opposes a per-employee tax like New Jersey’s law, Spiegel said. The group worries the structure could particularly affect workers who rely on public coverage even when they are employed.
For example, employees may remain on Medi-Cal because their employer’s plan does not adequately cover their children or because Medi-Cal provides better or more affordable coverage for certain chronic or complex health needs.
Additionally, part-time employees who work fewer than 30 hours a week may not qualify for employer-sponsored coverage, while workers in high-turnover jobs may leave before their benefits kick in.
Criminal justice advocates argue that individuals returning from incarceration could be particularly at risk.
“We know the data and statistics say that the number one intervention to reduce recidivism is employment,” said Maha Jweied, CEO of the Responsible Business Initiative for Justice. “This proposal has the unfortunate reality of undermining all the good reform efforts that have been made to ensure that when those individuals go home, they have benefits in hand.”
Two years ago, California became the first state in the country to offer prerelease enrollment on state health coverage. Stable health is essential for stable employment, Jweied said, and the state made immense progress when it recognized that. What worries her now is that it could become a barrier to employment.
Just the risk of increased tax exposure substantially disincentivizes companies from hiring returning citizens, Jweied said.
“Across the board, we feel, by and large businesses want to do the right thing. They want to support their employees, their customers, their communities. But if there’s hurdles placed in front of them from hiring certain communities, that will impact their ability to do so,” Jweied said.
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In Massachusetts, businesses navigated a per-employee tax for two years beginning in 2018 to help cover the cost of public healthcare, said Jon Hurst, CEO of the Retailers Association of Massachusetts.
Hurst said Massachusetts had previously asked employers to educate their employees and make sure they knew the state’s public health plan existed, much like California does now. Businesses were doing the right thing by promoting it, he said, and then the state turned around and taxed them for the employees that chose to take that option.
“Employees were making common sense financial decisions. And had it gone on to a permanent type of situation, I think employers would have likewise made some pretty common sense financial decisions as well,” Hurst said, referring to companies’ hiring and firing practices.
Christine Smith is a policy and legislative advocate at Health Access, one of the advocacy groups behind the Fair Share proposal. She said preventing discrimination against Medi-Cal recipients is a priority as the state develops the program. The group has also supported legislation that would explicitly prohibit employers from discriminating against workers because they are enrolled in Medi-Cal, Smith said.
But banning discrimination against Medi-Cal recipients would not necessarily prevent employers from changing how they hire to avoid a tax.
Opponents raise the possibility that companies could replace multiple part-time positions with fewer full-time workers, turn to automated kiosks instead of new hires or use proxies such as ZIP codes, gaps in employment or participation in reentry programs to avoid applicants they believe are more likely to rely on Medi-Cal.
“That is again not what we’re incentivizing,” Smith said in response to those concerns. “We are incentivizing people to provide healthcare to their workers or contribute to the state providing healthcare to their workers.”
New Jersey’s policy includes an anti-discrimination provision and exemptions for part-time and seasonal workers, as well as workers with disabilities. However, Spiegel said administering those exemptions could create another problem: Employers may need to identify which workers qualify, potentially exposing information about individual employees that companies otherwise would not have.
Spiegel said NJPP would have preferred a broader corporate fee that raises money for Medicaid without tying what a company owes to individual workers’ health coverage. Corporations would still contribute toward the public health system, she said, without making an employee’s Medicaid enrollment an additional cost of hiring them.
Rachel Linn Gish, interim deputy director of Health Access, said the Fair Share Act was designed to require the state to develop a proposal, rather than immediately impose a new policy, in part so questions like these can be considered during the process.
“What SB 177 does is pull together those plans so that we can talk about what this will look like and prevent some of the worst of that from happening,” Gish said. “So implementation is next year, and that fight will be where a lot of this will get discussed. And hopefully we will prevent that from happening.”
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