Could Your State Be Next? New Jersey's New Employer Healthcare Fee Explained

States continue to explore new approaches to address rising healthcare costs, and employers should be aware of emerging legislation that may create additional compliance obligations. New Jersey recently enacted an employer healthcare fee program that became effective July 1, 2026, requiring certain employers to contribute toward the state’s Medicaid program when employees and their dependents rely on Medicaid coverage.

While the requirements currently apply only to employers meeting specific criteria in New Jersey, the law represents a broader trend of states evaluating employer-funded healthcare programs as part of their efforts to address healthcare affordability.   

The law also prohibits employers from using an applicant's or employee's Medicaid status as a reason to deny employment, continued employment or advancement.   

The law applies based on the number of employees associated with an employer who are enrolled in New Jersey Medicaid, not simply the employer's total headcount. The fee schedule is: 

• 50–249 Medicaid-covered employees: $325 per Medicaid-covered employee and each Medicaid-covered dependent.  

  
  

• 250–499 Medicaid-covered employees: $525 per Medicaid-covered employee and each Medicaid-covered dependent.  

  
  

• 500 or more Medicaid-covered employees: $725 per Medicaid-covered employee and each Medicaid-covered dependent.  

  
  

The threshold is not based on having 50 total employees like the ACA's Applicable Large Employer (ALE) rules. 

Instead, the New Jersey law looks at how many of an employer's employees are enrolled in New Jersey Medicaid.  

For example: 

• An employer with 1,000 total employees but only 20 employees enrolled in New Jersey Medicaid would not meet the threshold.  

  
  

• An employer with 300 total employees and 75 employees enrolled in New Jersey Medicaid would fall into the first fee tier.  

The New Jersey requirement is designed to address concerns that some employers may not provide affordable healthcare coverage to employees, resulting in increased reliance on public healthcare programs. The program is structured as an employer fee, assessment, or contribution rather than a traditional tax. While New Jersey is among the first states in the current wave of states considering these types of programs, other states continue to evaluate similar approaches. 

New Jersey included several safeguards in the law. Beginning July 1, 2027, employees who have worked for an employer for fewer than 90 days will be excluded from the fee, along with part-time, per diem, temporary and seasonal workers. Fees assessed for those workers before that date may qualify for a credit or refund in the following year. In addition, employees and dependents with certain developmental, intellectual, or permanent physical disabilities are exempt from the assessment.  

Emerging Compliance Trend 

Employers should view this development as an emerging state compliance trend rather than an immediate nationwide requirement. For government contractors operating across multiple states, maintaining accurate workforce data and monitoring state-specific employment requirements will be increasingly important as additional states evaluate similar employer healthcare assessments. 

What Employers Should Do Now 

At this time, employers should not expect to independently enroll in a program or submit payments unless notified by the State of New Jersey. The legislation provides that the employer fee will be assessed by the state, based on employees and dependents receiving Medicaid coverage, and employers will be notified of any liability.  Employers with New Jersey employees should consider taking the following steps: 

• Review employee work locations: Confirm which employees are assigned to or working in New Jersey, particularly for employers with multi-state operations.  

  
  

• Maintain accurate employee records: Ensure payroll, benefits eligibility, and employee census information is accurate and up to date.  

  
  

• Monitor state communications: Watch for guidance from New Jersey agencies regarding employer notices, assessment procedures, payment deadlines, and any required appeals process.  

  
  

• Coordinate payroll and benefits administration: Employers should be prepared to address any State assessments that may require coordination between HR, payroll, finance, and benefits teams.  

  
  

• Avoid employment decisions based on Medicaid status: Employers should not ask applicants or employees whether they receive Medicaid benefits or make employment decisions based on an individual’s healthcare coverage status.  

The bill provides that: 

• The fee is assessed by the New Jersey Division of Revenue and Enterprise Services, not self-reported by employers.  

  
  

• The assessment is based on the number of employees and dependents receiving New Jersey Medicaid coverage as of December 31 preceding the assessment year.  

  
  

• Employers are then notified of their liability by the State.  

  
  

• Employers, if they receive an assessment, will be provided an opportunity to review or challenge the assessment if the employer believes the assessment is inaccurate. 

  
  

• The law also protects employee privacy by providing that individually identifiable information about an employee or dependent is exempt from public disclosure.  

Although the statute doesn't describe the mechanics, the State almost certainly will need to match Medicaid enrollment records with employer wage information, quarterly unemployment insurance (UI) wage reports and other payroll reporting.  

Growing Interest Among Other States 

New Jersey is not alone in exploring employer healthcare funding approaches. Similar proposals have been considered in several other states, including: 

• Colorado and Oregon – Both states considered legislation that would have required certain employers to contribute toward healthcare costs, although those proposals did not become law. 

  
  

• Washington – Lawmakers introduced a similar proposal focused on employer contributions toward healthcare affordability. 

  
  

• Connecticut – The Governor has proposed a future employer healthcare fee program that could take effect in upcoming years if approved. 

As States continue evaluating healthcare funding options, additional employer requirements may develop.  

Separate From ACA Employer Requirements 

New Jersey's employer healthcare fee is separate from the federal Affordable Care Act (ACA) and does not replace or modify existing employer responsibilities.

Employers that qualify as Applicable Large Employers (ALEs)—generally those with 50 or more full-time and full-time equivalent employees across all business locations—must continue to comply with the ACA's employer shared responsibility provisions, which generally require offering affordable, minimum-value health coverage to substantially all full-time employees and their dependent children or potentially facing an IRS employer shared responsibility payment. 

A State employer healthcare fee does not replace or modify an employer’s federal ACA responsibilities. Employers should continue to evaluate both Federal and State requirements when administering healthcare benefits. 

Your Compliance Partner 

C2 Essentials is committed to helping clients navigate an increasingly complex regulatory environment. As your PEO and HR consulting partner, we monitor legislative developments, evaluate their impact on employers, and align our HR, payroll, and compliance processes with new federal and state requirements as they become effective. Our goal is to help your organization remain compliant so you can stay focused on running your business.