Governor Proposes Increase in Health Insurance Claims Tax

February 16, 2015

The debate over whether to increase the Health Insurance Claims (HICA) Tax is back, just months after legislation was signed into law to reduce the rate from 1% on all paid health insurance claims to 0.75%. 

Governor Snyder, in his budget unveiling last Wednesday, called on the Legislature to increase the HICA rate from .75% to 1.3% to generate an additional $162.8 million in revenue for Michigan’s Medicaid program in Fiscal year 2016. The budget also calls for an elimination of the current statutory cap imposed upon revenue generated through HICA and Michigan’s Medicaid HMO Use Tax, which would generate an additional $17.3 million in HICA revenue. In total, this proposal is a $180.1 million tax increase on purchasers of health insurance, including job providers.

The Michigan Chamber does not argue that there is a need to adequately fund Medicaid to meet the health needs of our state’s most vulnerable citizens. However, we cannot support achieving this goal by continuing to levy higher and higher taxes on health insurance claims to support this program, simply because this tax makes it more costly for employers and individuals to purchase health insurance coverage. 

In the coming weeks, the Michigan Chamber will be voicing strong opposition to this budget provision and exploring alternative funding mechanisms. 

For more information, please contact Wendy Block at (517) 371-2100 or wblock@michamber.com.