MBPA Strongly Against Health Insurance Claims Tax

The Michigan Business and Professional Association (MBPA) is actively lobbying against language included in the Executive Budget recommendation that would increase health insurance costs for Michigan businesses and consumers by expanding the newly-enacted Health Insurance Claims (HICA) Tax. We oppose this uncompetitive tax increase to employers who are struggling to continue to provide health insurance coverage to workers in the face of an apparently endless line of government taxes and regulations.

The Executive Budget Recommendation would expand the HICA Tax from a one percent tax on paid health insurance claims to a variable rate tax, whereby unelected Treasury officials will determine the tax rate in order to collect enough revenue to meet the Medicaid “base need” plus the medical rate of inflation. Department of Community Health officials estimate that the rate would be initially increased by at least 50% to a 1.5% tax rate, though there is no forecast for future increases in the tax.

HICA was passed in 2011 as a replacement for the HMO Use Tax, which was the subject of federal scrutiny. The revenue from the HICA Tax is used to meet federal match requirements to fund Michigan’s Medicaid program. While this tax has been in place less than one year, it has not met revenue expectations. 

MBPA is opposed to increasing the HICA Tax and we are especially concerned with the proposal of a completely uncapped, unlimited and unpredictable tax rate. Businesses cannot operate in a state where there is no certainty in their tax obligations. This tax will only weaken Michigan’s business climate and make it more difficult for employers to continue to offer coverage.  

As this issue moves through the legislative process, we will keep you up to date. If you have any questions, please contact our government relations teams at: bbochniak@michbusiness.org or by phone at (586) 393-8800.