Health Insurance Claims Assessment – June 2013

By Bonnie Bochniak
MBPA Government Relations

The Michigan Business and Professional Association (MBPA) strongly opposed State House and Senate approved legislation, Senate Bill 335, which is now headed to Governor Snyder to sign into law that extends the Health Insurance Claims Assessment (HICA) Act. Senate Bill 335 extends the life of a 1 percent tax on all paid health claims for employees, which is used to meet federal match requirements to fund Michigan’s Medicaid program.

Background:
 

The Health Insurance Claims Assessment (HICA) Act was enacted during 2011 and took effect on January 1, 2012. The HICA replaced the Use Tax that had been applied to Medicaid managed care organizations. Revenue from the HICA is used to support the State’s Medicaid program.
 

The HICA rate was set at 1.0% of all paid health claims. There are exceptions: Federal government programs such as Medicare, Veterans Administration health care services, and fee-for-service Medicaid are not subject to the HICA, as the State cannot tax the Federal government. Similarly, out-of-pocket costs are not subject to the HICA.  There is also a lower rate of 0.1% for a very limited number of small health insurers.
 

Due to concerns that the HICA could raise more than the $400.0 million in revenue that was projected, a system of credits was created.  If revenue in any year exceeds $400.0 million as adjusted by medical inflation, each carrier, and third party administrator (for self-funded plans), will receive a proportional credit against the subsequent year’s HICA assessment.

Since the inception of the assessment, the funds collected from the HICA tax did not meet revenue expectations, thus extending the life of the tax was pursued to help fund Michigan’s Medicaid program, despite much opposition from the business community. The new legislation amends the HICA Act to delay the Act’s sunset from January 1, 2014, to January 1, 2018.

We will continue to keep you up to date. As always, please contact our Government Relations team with any questions. By phone: 888-277-6464 or by email: bbochniak@michbusiness.org  we value your feedback.