Establishes fee on certain employers that employ individuals who receive health benefits coverage through State Medicaid program.

A5324 1R FISCAL ESTIMATE

LEGISLATIVE FISCAL ESTIMATE

[First Reprint]

ASSEMBLY, No. 5324

STATE OF NEW JERSEY

222nd LEGISLATURE

DATED: JULY 6, 2026

SUMMARY

Synopsis:

Establishes fee on certain employers that employ
individuals who receive health benefits coverage through State Medicaid
program.

Type of Impact:

Annual net State revenue increases.

Annual State expenditure increases.

Agencies Affected:

Department of the Treasury; Department of Labor and
Workforce Development; Department of Human Services.

Office of
Legislative Services Estimate

Fiscal Impact

FY 2027

FY 2028

FY 2029

FY 2030

and thereafter

Net State Revenue Gain

$154.1 million

$23.2 million

$88.6 million

$88.6 million

State Expenditure
Increase

Indeterminate

Indeterminate

Indeterminate

Indeterminate

�

The Office of Legislative Services (OLS) estimates that this bill
will produce a net State revenue increase of $154.1 million in FY 2027 due to
the collection of fees from employers with at least 50 employees enrolled in
the State Medicaid program.

�

The OLS projects that the net State revenue increase will fall to
$23.2 million in FY 2028 due to exemptions of certain employees from these
employer fees beginning in FY 2028 combined with credits provided to employers
for fees previously paid for exempted employees.� The net State revenue
increase will rebound to $88.6 million during FY 2029 and future years, due to
the expiration of employer credits from fees previously paid for exempted
employees.

�

The projected net State revenue increases include partially
offsetting revenue losses from business expense deductions under the Gross
Income Tax and Corporation Business Tax.

�

The OLS also finds that the administrative activities required to
assess the fee will result in indeterminate increases in State expenditures,
while the collections of employer-noncompliance penalties will have
indeterminate impacts on State revenue.

BILL DESCRIPTION

���� The bill establishes
a fee, commencing July 1, 2026, to be paid by an employer for each employee or
dependent of an employee who receives health benefits coverage through the
State Medicaid program, in the following amounts for each employee and
dependent enrolled in Medicaid:

�

$325 for an employer with
between 50 and 249 employees enrolled in Medicaid;

�

$525 for an employer with
between 250 and 499 employees enrolled in Medicaid; and

�

$725 for an employer with 500
or more employees enrolled in Medicaid.

���� The bill provides
that an employer is not liable for the fee for an employee, or dependent of the
employee, who receives health benefits coverage through the State Medicaid
program and has a developmental disability, intellectual disability, or a
permanent physical disability.�

���� Beginning on July 1,
2027, applicable employers would be exempted from paying fees for: employees
whom they have employed for less than 90 days at the time that the fee is
determined; employees who work part-time, on a per diem basis, or who are
temporary employees; and seasonal employees.� If, prior to July 1, 2027, an
employer is charged any fees for employees who would be exempted beginning on
July 1, 2027, the employer will be entitled to a credit against any liability
for the provisions of the bill, or if there is no liability, a refund of those
fees in the following year.�������

���� The bill imposes
fines on employers that fail to pay the required fees and establishes an appeal
process for employers to dispute assessments of the fees.� The bill also
prohibits employers� use of Medicaid enrollment information as a basis for
employment decisions.

FISCAL ANALYSIS

EXECUTIVE BRANCH

����� None received.

OFFICE OF LEGISLATIVE SERVICES

����� The OLS estimates that this bill will produce the
following net State revenue increases due to the collection of fees from
private sector employers with at least 50 employees enrolled in the State
Medicaid program: $154.1 million in FY 2027, $23.2 million in FY 2028, and
$88.6 million in FY 2029 and each fiscal year thereafter.� These net State
revenue increases combine two different effects from the employer fee
collections and business expense deductions, as described below.

�����
Employer Fee Collections:
The OLS estimates
that the bill will increase State revenue by $174.1 million during FY 2027 due
to the collection of fees from employers in the State that employ at least 50
individuals enrolled in the State Medicaid program, including exemptions for employees
and employees� dependents who have a developmental disability, intellectual
disability, or permanent physical disability.� The OLS notes that the specific
definitions and data used to operationalize these disability exemptions could
result in broader or narrower exemptions than those assumed in these estimates,
thereby affecting the actual State revenue impacts.

����� Beginning on July 1, 2027, the bill additionally
exempts from the fee: individuals employed by employers for less than 90 days
at the time of each fee determination; employees who work part-time, on a per
diem basis, or are temporary employees; and seasonal employees.� Under the
bill, if an employer is charged a fee for these delayed exemptions between July
1, 2026 and June 30, 2027, the employer would be entitled to a credit in the
following year.� Thus, the OLS estimates a lower State revenue increase of
$26.2 million in FY 2028 due to fee collections being reduced by exempting the
employees listed above and partially offset by the employer credits for fees
collected on those exempted employees during FY 2027.

����� During FY 2029, and annually thereafter, with all
exemptions active and any applicable employer credits expired, the OLS
estimates State revenue increases of $100.2 million.

�����
Business Expense Deductions:
The OLS assumes
that all private sector employers required to pay the fee established under the
bill are currently subject to either the Gross Income Tax or the Corporation
Business Tax, including the Corporate Transit Fee.� In determining their entire
net income subject to income tax, businesses may deduct certain taxes and fees
imposed by New Jersey as ordinary business expenses.� To the extent that the
new fee is interpreted in a manner consistent with the Division of Taxation's
treatment of deductible business expenses for private sector employers, the
bill would also result in concurrent State revenue losses of: $20.0 million
during FY 2027; $3.0 million during FY 2028; and $11.5 million each year from
FY 2029 onward.� The combined impacts of employer fee collections and business
expense deductions are shown below:

OLS Fiscal Impacts of Establishing an Employer Healthcare
Assistance Contribution Fee

FY 2027

FY 2028

FY 2029

FY 2030

and thereafter

State
Revenue Increase:

Employer
Fee Collections

$174.1 million

$26.2 million

$100.2 million

$100.2 million

State
Revenue Loss:

Business
Expense Deductions

($20.0 million)

($3.0 million)

($11.5 million)

($11.5 million)

Net
State Revenue Gain

$154.1 million

$23.2 million

$88.6 million

$88.6 million

����� Further, the OLS finds that collections of
employer-noncompliance penalties under the bill will have indeterminate impacts
on State revenue, since the likelihood, frequency, and magnitude of such
penalties cannot be estimated from available data.� The OLS also cannot
determine the additional State administrative costs that may be incurred by the
Department of the Treasury, the Department of Labor and Workforce Development,
and the Department of Human Services when assessing the fee and performing
functions such as resolving employer appeals or managing additional
data-sharing.

����� This analysis is largely based upon data provided in
the
Department of Human Services�
2024 Annual Report on Access to Employer-Based Health Insurance
.� To
the extent that the fee established under the bill applies to more or fewer
employers, employees, or employee dependents than identified within this report
and assumed within this analysis, these estimates would be adjusted
accordingly.� The OLS also notes that employers� responses to the new fees,
such as enhancing offers of employer-sponsored health coverage (potentially
reducing Medicaid enrollment among employees subject to the fee) or shifting
employees to part-time working arrangements that are exempted from the fee,
could result in indeterminate downward adjustments to the anticipated State
revenue increases.

����� Finally, the OLS notes that pending changes to
Medicaid eligibility rules under the federal �One Big Beautiful Bill Act� will
have indeterminate impacts on the number of Medicaid-enrolled employees and
employee dependents subject to the employer fee under this bill due to the
complex potential effects of new �community engagement� rules, more frequent
eligibility reviews, and immigrant eligibility restrictions on the employees
and dependents subject to the employer fee.�

Section:

Human Services

Analyst:

Sarah Schmidt

Principal Research Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

This legislative fiscal estimate has been produced by the
Office of Legislative Services due to the failure of the Executive Branch to
respond to our request for a fiscal note.

This fiscal estimate has been prepared pursuant to P.L.1980,
c.67 (C.52:13B-6 et seq.).