Massachusetts Implements Employer Penalties for Employees Receiving Medicaid

On Aug. 1, 2017, Massachusetts enacted a new law intended to help fund MassHealth, the state’s Medicaid program. The new law temporarily:

  • Increases the existing Employer Medical Assistance Contribution (EMAC) amount; and
  • Imposes an employer penalty for each employee who has subsidized health coverage through MassHealth or the state Exchange instead of the employer’s plan.

This new law, which took effect immediately, applies to Massachusetts employers with six or more employees. These new provisions apply only through the 2019 calendar year.

In 2014 Massachusetts enacted an Employer Medical Assistance Contribution (EMAC) to help fund subsidized health coverage for low-income residents. Employers with six or more employees are subject to the EMAC requirements. Affected employers must pay contributions on the first $15,000 of each employee’s wages paid during the calendar year. Contribution amounts are determined by multiplying these wages by an assigned contribution rate.

To accomplish the goals of discouraging employees eligible for employer coverage from enrolling on MassHealth, and to help fund the MassHealth program, the Act temporarily increases the EMAC contribution rate through the 2019 calendar year, as follows:

  • In general, from 0.34 percent of an employee’s wages to 0.51 percent of an employee’s wages; and
  • For employers that are newly subject to the EMAC requirements, from 0.12 percent of an employee’s wages to 0.18 percent of an employee’s wages.

The increased contribution rate applies through Dec. 31, 2019. Beginning with the 2020 calendar year, the EMAC contribution rates will return to their previous percentages (0.34 percent and 0.12 percent, respectively).

In addition, effective Jan. 1, 2018, the Act imposes a temporary employer penalty of up to 5 percent of the employee’s wages for each nondisabled employee who receives subsidized health coverage through MassHealth or the Massachusetts Exchange (called Massachusetts Health Connector), instead of enrolling in employer-sponsored coverage.

This employer penalty is also effective only through the 2019 calendar year, and is scheduled to automatically sunset beginning in 2020. By implementing this employer penalty, Massachusetts became the first state to penalize employers whose employees choose to enroll in government-subsidized health coverage. The Act directs state agencies to issue regulations implementing these new provisions, which are expected to be issued shortly.

Refer to the attached Compliance Bulletin and contact your NEEBCo representative with questions.

Massachusetts Implements Employer Penalties for Employees Receiving Medicaid