SMALL BUSINESS TO MICHIGAN SENATE: NOT TOO LATE TO GO BACK TO THE DRAWING BOARD
December 11, 2015 (Lansing) – The state’s leading small business organization, the National Federation of Independent Business (NFIB) is calling on the Michigan Senate to put a stop to action by the state House that would impose a decade long extension of the current Health Insurance Claims Assessment (HICA) tax and questioning why there seems to be a sense of urgency to move now when the HICA tax, as it stands, runs through 2017.
“The HICA tax adds .75 percent onto the amount of every medical claim paid by employers as a way to raise federal match money for the state’s Medicaid program,” said Amanda Fisher, NFIB Michigan Assistant State Director. “As a result, employers already facing increasing costs to provide healthcare to their employees now have to pay an additional .75% on every insurance claim paid.”
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 Health Maintenance Organizations) was no longer allowed. However, other states have ignored the Federal edict and Michigan continues to collect the tax on Health Maintenance Organizations (HMO) as well as the new HICA tax.
“Right now the state is ‘double dipping’ by collecting both taxes while continuing to claim that they are going to have to stop collecting the HMO tax at some point,” said Fisher. “To add insult to injury, they now want to extend the HICA claims tax by changing the sunset date (the date the tax would end) from 2017 out to 2025 while collecting both taxes.”
On December 8th, the House passed HB 5105 which would extend the HICA Tax out until 2025, that would mean that when all is said and done, anyone using healthcare would be impacted by a $1.98 billion tax bill.
When the HMO Use Tax became the subject of federal scrutiny, the HICA Tax was passed as a mechanism to generate revenue to meet federal match requirements to fund Michigan’s Medicaid program. While Michigan complied at the time, other states like California and Pennsylvania continued with business as usual. The Federal Government once again has indicated that the HMO Use tax will not be accepted after year end 2016 however Michigan’s HICA Tax doesn’t sunset until December 31, 2017.
“We are very disappointed that the House chose to extend what equates to an expenditure of approximately 250 million tax dollars a year on both job providers and individuals.” Continued Fisher, “Our members understand the need to maintain a revenue stream for Medicaid however, extending this tax for almost a decade seems a little dramatic when we have until the end of 2017 to iron out the details.”
“We have been encouraged by the legislature’s past willingness to stand up to the federal government on what funds can be used to support Medicaid and certainly hope to continue those discussions. The Senate must look at this issue from the prospective 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 tax,” concluded Fisher.