OLYMPIA, WA – Washington state Democrats are likely abandoning plans for a new tax on employers like Walmart and Amazon, whose workers get health coverage through Medicaid.
The proposal came amid recent federal cuts to the program, which provides insurance for low-income Americans.
The Senate’s budget committee was set to vote on advancing the legislation last week, but declined to take action.
“I think it’s safe to say that that bill, at least on the Senate side, is not going to move this year,” said Senate Ways and Means Committee Chair June Robinson, D-Everett.
Senate Democrats’ leading tax policy voice said it was simply too complicated to pass in a short, 60-day legislative session.
“There is a lot of momentum there, but it’s fairly technical to get it done, and I just don’t think we had the time or bandwidth to finish out that conversation this session,” said Sen. Noel Frame, D-Seattle.
Under Senate Bill 6173, the state would’ve required private companies with over 100 employees to foot the bill for workers with taxpayer-funded coverage. This would have reportedly cost employers over $600 per month per staffer.
Critics said the tax could disincentivize hiring people with disabilities, who are more likely to be enrolled in Medicaid, and that the bill doesn’t take into account workers declining employer-sponsored insurance. Businesses believed it would add to their tax burden after the Legislature passed a suite of levies last year focused on them.
Last summer, congressional Republicans approved major cuts to Medicaid to help offset tax cuts for wealthy Americans and big businesses.
The biggest change is new Medicaid work requirements that could start as soon as January 2027. Enrollees will consistently have to prove they’re working, volunteering or attending classes at least 80 hours per month or show they qualify for an exemption. The mandate would apply to healthy adults up to age 64 without dependent children under 13 years old.
The state is expecting to lose billions of federal dollars due to the cuts, and a quarter-million residents could lose their Medicaid coverage.
Separate from the work requirements, the “big, beautiful bill” axes coverage for 30,000 lawfully present noncitizens in Washington.
The tax wouldn’t have taken effect until the federal work requirements go into force, so it wouldn’t have played into lawmakers’ current budget plans. It was projected to bring in over $950 million starting in the 2027-29 fiscal cycle, rising to nearly $1.6 billion in the next biennium, according to an initial fiscal analysis.
Amazon and Walmart lead the pack of employers whose workers get coverage through Apple Health, according to a state Health Care Authority report from 2024. As of April 2024, nearly 7,500 Walmart workers and dependents were enrolled in Medicaid, costing about $28 million per year. Amazon had about 8,100 employees and dependents to the tune of $30 million annually.
Other companies high on the list include McDonald’s, Kroger, DoorDash, Uber and Cerberus Capital Management, which owns Albertsons. In total, annual Medicaid spending on employed Apple Health enrollees and their dependents is roughly $2.3 billion, according to the state data.
Companies take issue with the data, noting it’s self-reported and some of the workers are part-time.
Nearly 2 million Washingtonians are enrolled in Apple Health, with over 600,000 of them covered through the expansion of Medicaid under the Affordable Care Act. This subset is the population the tax would cover.
Washington has made progress in reducing its rate of residents without insurance in recent years.
“We don’t want that to go backwards,” Senate Majority Leader Jamie Pedersen told reporters last week. “So I think it’s very much a conversation that we’re interested in having.”
Despite their frustrations with the “big, beautiful bill,” backers of the proposed tax say its new requirements will make imposing such a new tax possible. The state is planning to budget tens of millions of dollars to build out the computer infrastructure to enforce the new mandates, giving officials the data needed to impose such a levy.
Pedersen, D-Seattle, noted such an idea “has kicked around in some form for a while.” But it would’ve been difficult to implement due to data deficiencies about where Apple Health recipients work.
At the federal level, U.S. Sen. Bernie Sanders, of Vermont, pushed years ago for a tax on big companies based on the amount of money their employees receive in federal benefits, with a focus on Amazon. The bill didn’t go anywhere.
For years, Massachusetts has taken a similar, though not identical, approach to Washington’s proposal, noted Emily Brice, co-executive director of advocacy at Northwest Health Law Advocates.
Other ideas
This isn’t the only idea lawmakers have floated to raise money for health coverage.
Another bill would impose a new assessment on insurers to fund abortion services. That idea, which awaits a vote from the full Senate, would raise about $10 million for the current budget, according to a fiscal analysis.
Another proposal would roll back a business and occupation tax break for some insurers, which would bring in an estimated $56 million for this budget, and less in future years. The House version of this bill is teed up for a floor vote, while the Senate Ways and Means Committee advanced its chamber’s iteration Thursday. This proposal, also floated by Gov. Bob Ferguson, was included in House and Senate Democrats’ budget plans released Sunday.
Yet another piece of legislation would lean on nonprofit health carriers to fund the state’s premium assistance program for those covered through the Washington Health Benefit Exchange. Enrollees through the exchange are dealing with premium increases amid the loss of federal subsidies, which has led to fewer people signing up for coverage.
The bill got a hearing Thursday in Ways and Means. Insurers like Premera, Kaiser and Regence BlueShield are opposed.
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