New Jersey Charges Firms With Workers on Medicaid

New Jersey has become the first state in nearly a decade to charge employers whose workers rely on Medicaid for health coverage, a move that could reshape how states respond to federal healthcare changes under the Trump administration. Gov. Mikie Sherrill signed the measure into law on Tuesday, July 1, with the state budget counting on $145 million in revenue from the program this fiscal year.

Under the new law, companies will be billed for each employee — and each employee’s dependent — receiving Medicaid coverage. The fees follow a sliding scale: $325 per person per year for employers with 50 to 249 Medicaid beneficiaries, $525 for those with 250 to 499, and $725 for companies with 500 or more recipients, according to AP News.

Why Now? The Federal Driver

The policy is a direct response to the One Big Beautiful Bill Act (OBBBA), signed by President Trump in July 2025, which imposes work requirements on Medicaid recipients and tightens eligibility verification. The Congressional Budget Office projects the law will cause more than 10 million people to become uninsured by 2034, shifting costs to states as federal support shrinks.

Democratic-led states facing these budget pressures see employer fees as a way to fill gaps without raising broad-based taxes. The New Jersey bill (A-5324/S-4533) passed the Assembly by a 48-22 vote on June 30, as reported by Insider NJ.

A Growing Multi-State Movement

New Jersey is not acting alone. A wave of similar proposals is moving through state legislatures across the country:

• California: A bill passed this week directs the state administration to present employer fee options for 2027. Democratic gubernatorial candidate Xavier Becerra has made the charge part of his campaign platform.
• Connecticut: Gov. Ned Lamont, a Democrat seeking a third term, has called for a similar measure in the state budget.
• Colorado and Oregon: Bills passed one legislative chamber each in 2026 but did not become law.
• Washington: A measure was introduced.

State Sen. John Laird (D-CA), sponsor of California’s proposal, framed the issue as one of fairness. “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,” he said. “And that’s not fair.”

Business Opposition

Not surprisingly, business groups have pushed back hard. The New Jersey Business and Industry Association (NJBIA) opposed the legislation, arguing that employers cannot control whether workers choose Medicaid over company-provided plans — especially when Medicaid offers zero-premium, zero-deductible coverage.

“The fact remains that many job-creators are still going to be penalized for something they have no control over,” Christopher Emigholz, NJBIA’s chief government affairs officer, said in a statement. “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.”

Unusual Opposition from the Left

The fee has also drawn criticism from some progressive policy organizations. Gideon Lukens, a health policy analyst at the left-leaning Center on Budget and Policy Priorities, warned of unintended consequences. “Usually, when I see a tax on something it’s going to discourage whatever being taxed,” he said, noting that the fee could make companies less willing to hire low-income workers, single parents, or large families who are more likely to have Medicaid coverage.

Historical Precedents

Charging employers for workers on Medicaid is not a new idea — but it has never stuck for long. Massachusetts adopted a similar charge in 2017, reaching up to $750 per nondisabled worker on Medicaid. The program ran from 2018 to 2019 and was not renewed. Maryland enacted an employer fee targeting Walmart in 2006, but it was struck down by a federal court under ERISA, the federal law governing self-insured health plans.

New Jersey’s law attempts to avoid this legal pitfall by not referencing employer health plans in the legislation. It also includes exemptions for part-time, seasonal, and temporary employees (effective July 2027), as well as workers with developmental or physical disabilities.

What to Watch

The Sherrill Administration estimates the fee could raise $183.6 million in the current fiscal year, though the budget conservatively counts on $145 million. Large employers with significant low-wage workforces — including Amazon, Walmart, and staffing agencies — will be most affected.

Key questions remain: Will the fee withstand legal challenges from business groups? How will large employers respond — by adjusting wages, benefits, or hiring practices? And will the multi-state “copycat effect” lead to a patchwork of employer Medicaid fees across the country?

For now, all eyes are on New Jersey. If the policy survives legal scrutiny and delivers on its revenue promises, it could become a template for Democratic-led states grappling with the fiscal fallout of federal healthcare reform.