In an effort to make up for a funding shortfall in the Commonwealth of Massachusetts’ Medicaid program, state policymakers have proposed solutions that include a “play-or-pay” option under which employers who fail to offer major medical coverage, or who offer coverage but have low take-up rates, would be required to pay an additional “employer contribution” to the Commonwealth based on multiple factors and complex computations. Another option would make up the shortfall with an across-the-board increase, similar to a payroll tax increase, in the Employer Medical Assistance Contribution (or “EMAC”), which helps defray Medicaid financing.
This post argues in favor of the latter option. We are of the view that an across-the-board increase in EMAC payments, would be vastly preferable because of its simplicity and ease of administration. The “play-or-pay” option would not only be extremely complicated to comply with and enforce, but, as we explain below, it may be preempted by federal law, i.e., the Employee Retirement Income Security Act of 1974 (ERISA).