Good News! HICA Tax Compromise on its Way to Governor, Clearing the Way for its Eventual Repeal

February 24, 2016

Legislation is on its way to the Governor that will allow the state to eventually repeal Michigan’s punitive Health Insurance Claims Assessment (or “HICA Tax”) and move towards an alternative solution that maintains the necessary revenue while making health insurance more affordable for all Michiganders.

The bill passed by the Michigan Senate under the direction of Senate Majority Leader Arlan Meekhof (R-Holland) strikes a strong contrast to legislation passed by the Michigan House at the end of 2015. The House proposal, which was strongly opposed by the Michigan Chamber, would have imposed a $1.98 billion HICA tax increase on health insurance claims. The HICA Tax is wholly unique to Michigan and unfairly penalizes Chamber members who are purchasing health insurance for their employees.

Senator Meekhof and his GOP colleagues listened to the Chamber’s grassroots network and passed a proposal that strikes a short-term compromise while staying focused on a long-term solution. The collective efforts of Chamber members made it impossible for the Senate to muster the votes to get this tax increase through and cleared the path for the Chamber-backed alternative solution.

The alternative was passed by the Michigan Senate this morning and was approved by the House later in the day. The compromise approach will:

  • Create a legislative task force to study—and expeditiously pursue—a combined solution to bring Michigan’s current Managed Care Organization Use Tax (“MCO Use Tax”) into compliance with federal law;
  • Extend the HICA sunset from December 31, 2017 to July 1, 2020 with an agreement with legislative leaders that this sunset is a temporary, stop-gap measure while work continues to reconfigure the MCO Use Tax;
  • Allow for the statutory phase out and full elimination of the HICA tax once the MCO Use Tax alternative is in place; and
  • Solidify an agreement with legislative leaders that no other extension, expansion or increase of the HICA tax will occur while our work continues on this agreed-upon alternative approach.

The Senate response to the House plan will save Michigan job providers $1.2 billion—or more—over the House plan. The alternative solution on the table creates a path to repeal of the HICA Tax and is supported by Republicans and Democrats, business and labor. The alternative solution does not involve increasing or raising taxes, would prevent cuts to core budgetary items and would make health insurance more affordable.

It is now time for the Chamber to stand on the gas on the alternative solution, allowing the HICA Tax to be repealed once and for all.