Democrats are seeking to require Colorado’s largest corporations to pay thousands of dollars for each employee that relies on the Medicaid program for health insurance.

They don’t have to pay the fee if they can demonstrate offering an “affordable health coverage” to workers, defined as the minimum required by federal law.

It’s the latest effort by the cash-strapped legislature to find new revenue in order to finance its spending priorities amid a $1.5 billion deficit.

That deficit is the result of several factors, notably an explosion in the cost of the state Medicaid program. Democrats have also blamed the federal budget for changes to the tax code, which they said have resulted in Colorado’s revenue shrinking. Republicans have countered that actions by the Democratic majority, including overspending, are the culprit for the state’s fiscal woes.

House Bill 1327, sponsored by Rep. Lisa Feret, D-Arvada, won a party-line 8-5 vote from the committee. It now heads to the House Finance Committee.

The measure would create the Large Employer Health-Care Support Enterprise in the Department of Health Care Policy and Financing, with fees paid by the large corporations. The fee, as dictated by the bill, is $2,300 per employee who receives Medicaid services provided by the state.

Under HB 1327, a large corporation is defined as an employer with at least 500 employees who are receiving Medicaid services from the state.

Corporations that provide affordable health coverage to all workers working 20 or more hours per week or 80 or more hours per month — or is a franchisee, a nonprofit, a public employer or has a collective bargaining agreement that includes health care coverage — would be exempt.

HB 1327, which wouldn’t go into effect until 2028, carries a cost for the state of about $200,000 in the 2026-27 budget and almost $1 million in the following year.

That’s a problem in a budget year when the state is seeking to cover a nearly $1.5 billion general fund shortfall.

Medicaid costs have ballooned for the state in the past eight years.

In the 2018-19 state budget, the total cost for Medicaid stood at $7.6 billion, with about $2.1 billion paid for by the state with general fund dollars and $4.5 billion coming from federal matching dollars.

The 2025-26 budget for Medicaid now totaled $13.3 billion, with the state general fund covering $3.9 billion and federal funds of $7.8 billion.

For example, a state program providing health care to pregnant women and children living in the country illegally is costing far more than lawmakers expected, with expenses nearly tripling in just a year and threatening to squeeze Colorado’s budget amid a $1 billion shortfall. Cover All Coloradans, launched in 2024, now enrolls more than 30,000 people and could require over $112 million in general fund dollars in the next budget year — more than six times the initial estimate.

Meanwhile, a congressional committee is probing reports of waste, fraud and abuse in Colorado’s Medicaid program, citing recent stories outlining over-billing in transportation spending and alleged improper payments in autism services. The reports have noted that a significant spike in rate change resulted in the non-emergency medical transport ballooning in costs to $303 million in 2024 from $70.5 million in 2022.

Fueling the proposed legislation is the argument that large employers benefit from government-funded health coverage, while raking in profits because they’re not paying for that cost themselves.

A Government Accountability Office report in 2020, which looked at 11 states that administer Medicaid and Supplemental Nutrition Assistance Program found that Walmart was one of the top four employers of SNAP and Medicaid beneficiaries in every state. McDonald’s was in the top five of employers with employees receiving federal benefits in at least nine states.

In a statement, Feret said Colorado taxpayers “should not subsidize the nation’s largest corporations by way of our state providing Medicaid for their employees.”

She said the largest corporate employers in Colorado take in record-breaking profits and report high stock prices, while forcing taxpayers to pick up the tab for health insurance costs for those corporation employees.

In the same statement, Democrats said the nation’s largest corporations, while projecting to attain record profits, have on average 30% to 40% of their employees enrolled in Medicaid. They pointed to a Kaiser Family Foundation report saying 75% of Medicaid recipients in Colorado are working. 

The opposition to HB 1327 includes Target, Home Depot, the Colorado Retail Council and the Denver and Colorado chambers of commerce.

In a statement, Katie Wolf, representing the Colorado Retail Council, said the legislation will raise costs and force companies to stop hiring.

“When you make it more expensive to run a business and hire workers, employers are forced to raise costs and stop hiring them,” Wolf said. “Even original stakeholders and supporters of the bill have acknowledged employers will have to stop hiring Medicaid-likely workers–potentially pushing thousands off of Medicaid–hurting the very people it’s supposedly designed to protect.”

Wolf noted the bill claims it would raise $85 million per year beginning in the 2028-29 fiscal year.

That, she said, is “serious money to lose for Colorado businesses — but a drop in the bucket for the state’s Medicaid shortfall, which is measured in the billions.”

“Coloradans need real solutions to the real problems facing the state’s budget and working families, yet House Bill 1327 is another political messaging bill that is likely illegal and certainly unworkable,” she added.

And it may be illegal, a point raised by the Colorado Chamber of Commerce’s Meghan Dollar.

She told the committee on Tuesday that taxing or putting more fees on Colorado business is not the way to solve the budget crisis — or solve Colorado’s Medicaid woes.

HB 1327 would add between $15 million and $100 million annually in new costs to businesses in Colorado, she said, and that means higher prices for families, fewer investments, and in many cases, business closures or relocation out of Colorado.

“Companies are leaving the state even without Colorado being the only state in the nation with a fee for employers to pay for Medicaid,” Dollar said.

Finally, HB 1327 is likely illegal and unworkable, she argued.

“Federal law strictly governs Medicaid funding, and this proposal raises serious concerns under federal preemption and ERISA. It also asks employers to track information they cannot legally access, such as Medicaid status tied to private household and health data,” she said.

Feret said the state would not require companies to share any medical-related data, status or income.

On the reporting issue, an amendment adopted Tuesday spells out just how much information would be required. The amendment requires the employer to report a worker’s full name and date of birth, average number of hours worked per month, and the dates when the employee worked. Feret said this is information employers also provide to the Department of Labor and Employment.

The bill does not require employers to disclose which employees are on Medicaid — Feret said employers wouldn’t know which employees are on the government program or on any other health insurance outside of what’s provided by the employer.