California just signed off on a law that could eventually force its biggest companies to help pay for employees' Medi-Cal coverage, but advocates for formerly incarcerated people, disability groups, and even some Medicaid-funding advocates are already warning that the plan, as designed, could backfire by discouraging employers from hiring people who rely on public health insurance in the first place.
Governor Gavin Newsom signed the Fair Share from Big Corporations Act, also known as Senate Bill 177, into California law on July 8, 2026. As reported by the Sacramento Bee, the law does not immediately create a new tax. Instead, it directs the state's Department of Finance to develop a proposal by March 1, 2027, requiring California's largest corporations to help cover Medi-Cal costs tied to their employees. One of the options under study, according to The Accountancy, would apply a premium on employers with at least 250 workers when those employees rely on Medi-Cal without being offered coverage through their job.
The stakes are considerable. Medi-Cal, California's version of Medicaid, is jointly funded by the state and federal governments and covers roughly 15 million people — about one in three state residents — according to the California Health Care Foundation. The idea behind a per-employee tax, per the Sacramento Bee's reporting, is to incentivize large employers to offer more affordable and comprehensive health coverage rather than let workers lean on the public safety net.
Advocates Warn the Fix Could Punish the People It's Meant to Help
The concern raised most often is that tying a company's tax bill to the number of workers enrolled in Medi-Cal could make businesses wary of hiring or retaining those same workers. Jennifer Spiegel said employers should not be incentivized to avoid hiring people on Medicaid or discourage Medi-Cal enrollment, per the Sacramento Bee's reporting. She also warned that administering exemptions under such a system could expose sensitive information about individual employees.
Maha Jweied raised a related alarm specific to people leaving incarceration, saying employment is the number one intervention to reduce recidivism, according to the same report. Jweied warned the proposal could undermine reforms that give formerly incarcerated people benefits when they return home — a concern that carries particular weight in California, which became the first state to offer prerelease enrollment in state health coverage back in 2024, per the Sacramento Bee. The Responsible Business Initiative for Justice, an organization advocating for criminal-justice reform, has been vocal in that debate, and opponents more broadly have raised the possibility that increased tax exposure could disincentivize companies from hiring people returning from incarceration.
Opponents also flagged less obvious workarounds companies might pursue: replacing multiple part-time positions with fewer full-time roles, using zip codes, employment gaps, or reentry-program participation as informal hiring proxies, or leaning on automated kiosks instead of new hires. Separately, the LA Times reported in May 2026 that business commentators warned per-employee public assistance fees could push large companies toward reducing hours, relying more on contract labor, or automating positions altogether — a critique that echoes those raised in the Fair Share debate.
Why Some Workers Stay on Medi-Cal Even With a Job
Part of the complexity is that Medi-Cal enrollment among employed people isn't always a simple story of employers withholding coverage. Part-time employees working fewer than 30 hours a week may not qualify for employer-sponsored coverage at all. Workers in high-turnover jobs may leave before employer benefits even kick in, and some employees stay on Medi-Cal because their employer plan doesn't adequately cover their children, or because Medi-Cal offers better or more affordable coverage for certain chronic or complex health needs.
Health Access, the advocacy group behind the Fair Share proposal, has pushed back against the idea that the law would penalize workers. Christine Smith, speaking for Health Access, said preventing discrimination against Medi-Cal recipients is a priority as the program is developed, according to the Sacramento Bee's reporting. Health Access has also supported legislation that would explicitly prohibit employers from discriminating against Medi-Cal-enrolled workers.
New Jersey and Massachusetts Offer Two Very Different Models
California isn't the first state to wrestle with this idea, and the two existing examples point in different directions. New Jersey enacted its own active per-employee Medicaid tax in July 2026, charging companies with 50 or more Medicaid-enrolled workers between $325 and $725 annually per enrolled worker and dependent, aiming to raise $145 million a year, according to CBS News. New Jersey's version includes an anti-discrimination provision and exempts part-time and seasonal workers as well as workers with disabilities.
New Jersey Policy Perspective has taken a nuanced stance in the debate: the group supports requiring corporations to help fund public health insurance in general, but opposes a per-employee tax structure specifically, preferring a broader corporate fee that raises Medicaid money without tying payments to individual workers' coverage status. The organization's research, published in August 2026, found that federal Medicaid cuts under H.R. 1 threaten to disenroll 300,000 New Jersey enrollees and strip $3.3 billion in federal funds, which is part of what's driving states to look at employers for new revenue.
Massachusetts already tried a similar approach and abandoned it. The state operated a temporary Employer Medical Assistance Contribution supplement in 2018 and 2019, taxing businesses up to 5% of taxable wages, or $750 annually per worker, for non-disabled employees enrolled in state-subsidized care, according to Mintz. Jon Hurst said Massachusetts businesses navigated that per-employee public-healthcare tax for two years beginning in 2018, per the Sacramento Bee's reporting. Massachusetts used the fee to help close a $600 million Medicaid budget deficit before letting it sunset.
What Happens Next in California
Rachel Linn Gish emphasized that the Fair Share Act requires the state to develop a proposal rather than immediately impose a new policy, according to the Sacramento Bee. That distinction matters: California's Department of Finance received $1 million in the state's 2026–27 budget specifically to study and draft options for the employer assessment, part of a broader $351.7 billion spending package, according to the Western Center on Law & Poverty. That budget leaned on more than $5 billion in new ongoing revenues, including MCO tax extensions and business tax credit caps, to delay major Medi-Cal benefit reductions.
The political fight is likely to intensify well before the March 2027 deadline. Democratic gubernatorial candidate Xavier Becerra publicly endorsed the corporate healthcare tax in July 2026, pledging to turn SB 177's study into an enforceable employer fee if elected governor, according to POLITICO Pro. Newsom, for his part, deferred the final tax decision to the 2027 legislative cycle. The Fair Share Act will proceed to implementation discussions next year, per the Sacramento Bee's reporting.
One provision could stop the entire effort before it starts. SB 177 contains a non-severability clause stating that California's requirement to develop the Fair Share proposal becomes void if federal Medicaid reductions under Public Law 119-21 are repealed before March 1, 2027, according to BillTrack50. That clause ties California's entire tax-planning process directly to the fate of federal policy in Washington — meaning the fight over Fair Share could end up being decided far from Sacramento.
