ColoradoCare Amendment Could Lead to Significant Healthcare Cost Increases for Employers
Colorado employers may soon see a significant payroll tax increase. In November 2016, Colorado voters will decide whether to adopt Amendment 69 (“ColoradoCare”), a universal healthcare system that would eliminate the state’s healthcare exchange and private health plans offered by employers.[1] If implemented, Colorado employers would largely be responsible for paying for ColoradoCare and its estimated $25 billion price tag.[2] This article analyzes ColoradoCare and its potential impact on employers.
A. ColoradoCare
In late 2015, ColoradoCare received enough signatures to qualify for Colorado’s 2016 ballot.[3] If passed, ColoradoCare will provide healthcare to all residents of Colorado who have lived in the state for at least one year.[4] In addition, Coloradans would no longer have to pay insurance premiums to cover their healthcare costs.[5] However, ColoradoCare would not be free. To pay for the new healthcare system, Colorado would institute a 10 percent payroll tax where employers would pay 6.67 percent of total payroll into the system, and employees would pay 3.33 percent of their wages.[6] Nonetheless, the payroll tax could be increased. ColoradoCare would be run by a Board of Trustees, with one member elected from each district around the state, and would be exempt from the Colorado Taxpayers Bill of Rights, which places restrictions on tax increases. As a result, the Board of Trustees would have the ability to increase the payroll tax percentages.[7]
B. Impact on Employers
Depending on the employer, ColoradoCare could have a significant impact. Employers that do not currently offer health insurance would see the biggest initial impact, as their healthcare costs would go from zero to 6.67 percent of total payroll. Employers who currently offer health insurance, but whose healthcare costs are currently below 6.67 percent of total payroll, would also experience an increase in healthcare costs. For example, an employer whose healthcare costs were 5 percent of total payroll would no longer pay for private insurance, but would be required to pay 6.67 percent of total payroll into ColoradoCare, resulting in an approximate 33 percent increase in healthcare costs. Further, all employers would be subject to ColoradoCare’s Board of Trustees ability to increase the payroll tax percentages, and would constantly have to be aware of inevitable tax increases. Accordingly, if ColoradoCare is passed, Colorado employers may see a significant increase in their healthcare costs.
[1] Blair Shiff and Brandon Rittiman, ‘ColoradoCare’ to appear on 2016 ballot, 9NEWS, (Nov. 12, 2015), http://www.9news.com/story/news/local/politics/2015/11/09/coloradocare-ballot/75467540/ (last accessed Jan. 20, 2016). ColoradoCare would also replace Medicaid and supplemental Medicare plans.
[2] Id.
[3] Id. If approved, Colorado would need to get an Affordable Care Act waiver to have the state provide healthcare under ColoradoCare.
[4] New residents would have the option of paying a premium to buy in until they have established one year of residency.
[5] Colorado employers would also see a decrease in workers’ compensation costs, as many claims that previously would have qualified under the Colorado Workers’ Compensation statute would fall under the auspices of ColoradoCare.
[6] The payroll tax would only apply to the first $350,000.00 for single filers, and $450,000.00 for joint filers. Non-employment income would also be subject to the 10 percent sales tax.
[7] The Board of Trustees would only be allowed to increase the payroll tax once per year, and any tax increase would need to be approved by the ColoradoCare members (i.e. Colorado residents over the age of eighteen who have lived in the state for at least one year).