What Employers Need to Know about New Jersey Employer Medicaid Assessment

New Jersey recently enacted legislation which will tax certain employers if their employees or employees’ dependents receive health coverage through the NJ State Medicaid program. The stated goal of P.L.2026, c.23is to assist with funding NJ’s Medicaid programs in light of recent federal cuts by implementing an annual assessment on employers with 50 or more employees or employees’ dependents enrolled in Medicaid. The assessment is projected to raise around $145 million in revenue for the State annually.

How Much is the Fee?

The amount of the fee is based on the number of employees or employees’ dependents who enroll in an NJ Medicaid program. The current fees are as follows:

·       Employers with 50-249 employees or dependents who enroll in Medicaid: $325 per employee or dependent.

·       Employers with 250-499 employees or dependents who enroll in Medicaid: $525 per employee or dependent.

·       Employers with 500+ employees or dependents who enroll in Medicaid: $725 per employee or dependent.

Additional penalties may be imposed for late payments or non-compliance. Employers have the ability to appeal assessed fees. Further guidance on the appeals process is pending.

Are there Exemptions?

Employers will not be assessed a fee for Medicaid enrolled employees or dependents who have a developmental disability, intellectual disability, or permanent physical disability. Additionally, effective July 1,2027, the following employee categories will also be exempt:

·       Employees who have been employed by the employer for less than 90 days at the time the fee is assessed.

·       Part-time, per diem, or temporary employees.

·       Seasonal employees.

If an employer is assessed a fee for any employee who will be excluded as of July 1, 2027, prior to that date, they will be entitled to a credit toward any liability owed or a refund in the following year, if no additional liability is assessed.

The law does not currently contain exclusions for employers located outside of New Jersey. If an employer, regardless of headquarters or primary work location, has New Jersey based employees or dependents enrolled in the State Medicaid program, they may be liable for the fee.

How are Employees Counted?

The legislation language is vague on how the State intends to count or identify the employees or dependents covered by Medicaid. As of now, employers are not required to self-report the number of Medicaid covered individuals to the State and, in most cases, employers would be unable to do so as this information is typically protected by various privacy laws, e.g., HIPAA and New Jersey’s Open Public Records Act. It is anticipated that the State will match Medicaid enrollment records and employer unemployment insurance and/or wage reporting records to determine which employees or dependents are enrolled in Medicaid so the fee can be assessed. Additional guidance is needed and will likely be available as implementation begins and administrative processes are developed.

Anti-Retaliation Provisions

Employers are prohibited from using, considering, or relying upon whether an employee, employees’ dependent, or job applicant is enrolled in the State Medicaid program in its hiring or job advancement practices. Employees, dependents, and/or job applicants have enforcement rights under the New Jersey Civil Rights Act.

Employer Next Steps

Despite additional guidance being needed the law is effective as of July 1, 2026. Due to this, employers should consider the potential impacts and exposure the legislation creates. The following actions can be taken now to mitigate potential risk:

·       Ensure Affordability: Review benefit offerings and plan costs to determine whether changes can be made to entice employee enrollment.

·       Employee Classifications: Evaluate current employee classifications to confirm which employees may fall into an exempt category.

·       Measure Risk and Budget for Potential Liability: With the information available and without violating privacy laws, assess whether a significant number of employees or dependents may be enrolled in an NJ State Medicaid program and determine which budgetary steps might be needed.

·       Enrollment Waivers: Review current open enrollment and new hire enrollment processes and determine whether waiver attestations can be utilized to document enrollment.

·       Monitor Guidance: Continue to look out for additional regulations and administrative guidance clarifying employer next steps, assessment timing, and how the State will identify employees and assess fees.

·       Consult Advisors and Vendors: Work alongside benefit consultants, legal counsel, and tax advisors to review exposure and ensure compliance.

Innovative Benefit Planning will continue to monitor guidance as implementation begins and will provide updates as they are made available. If you have questions, please reach out to your Innovative Account Team.