Stop Taxing Health Insurance Claims

Date: December 30, 2015 Last Edit: June 10, 2016

Related Content: Issues State Michigan

Small Business Challenges in 2016

In the final days of the 2015 session, the legislature attempted to breathe new life into a medical claims tax that was supposed to sunset (expire) in 2017. House Bill 5105 would extend the Health Insurance Claims Assessment (HICA) tax out to 2025 and increase the rate from .75% to 1% in 2017. Total cost to taxpayers would be $330 million a year out to 2025 for a total tax of $1.98 billion.

Although legislation has been passed in 2016 that will extend the Health Insurance Claims Assessment (HICA) tax out to 2020, recent court action and further guidance from the federal Centers for Medicare & Medicaid Services (CMS) have made it clear that the current HICA tax will have to end long before then. NFIB has already been working with other groups and lawmakers to replace the tax this session with a broader base solution that doesn’t saddle small business with the social costs of Medicaid.

The HICA tax currently adds .75 percent onto the amount of every medical claim paid by employers, employees and private citizens as a way to raise federal match money for the state’s Medicaid program. The tax was created in 2011 when the Federal government declared that the current method employed by Michigan to raise match money (via a tax on Medicaid Health Maintenance Organizations) was no longer allowed. However, other states have ignored the Federal edict and Michigan continues to collect the tax on Medicaid Health Maintenance Organizations (HMO) as well as the new HICA tax.

As a result, employers, employees and private citizens that are already facing increasing costs to obtain healthcare, or provide it to their employees, now have to pay an additional .75% on every insurance claim paid.

The Senate must look at this issue from the perspective of not only job providers, but individuals currently utilizing the Medicaid safety net. We strongly encourage them to go back to the drawing board and create a fiscally sound and prudent alternative to the House’s overreaching plan to extend the HICA tax.

UPDATE: NFIB backed Legislation that would eliminate the tax on medical claims otherwise known as the Health Insurance Claims Assessment (HICA) has made it out of the Senate and is now ready for House action when session resumes in the fall.


Related Content: Issues | State | Michigan

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