House and Senate Budgets Drop Health Insurance Claims (HICA) Tax

March 29, 2015

After the business community strongly challenged Gov. Snyder’s budget proposal to increase taxes on health insurance purchasers, the Michigan House and Senate Appropriations Subcommittees on the Department of Community Health abandoned the effort and passed budget bills without the provision or revenue.

The Governor’s Department of Community Health budget proposed to increase the Health Insurance Claims (HICA) tax from a 0.75 percent tax on paid health insurance claims to a 1.3 percent tax. The budget proposal also called for retaining Michigan’s Use Tax on Medicaid Managed Care Organizations (MCOs) and removing an important safeguard in current law specifying that the HICA and Use Tax together could collect no more than $450 million. 

If the revenue cap were to be removed per the Governor’s recommendation, the budget would generate an additional $327 million from both taxes, well above the amount needed to fund Medicaid, which is the reason these taxes were enacted in the first place. It remains unclear where the additional $327 million in revenue will be spent—but it appears it would be used for other, non-related general fund purposes.

The Michigan Chamber agrees that there is a need to adequately fund Medicaid to meet the health needs of our state’s most vulnerable citizens, but we cannot support a proposal to bring in excess revenues to fund unknown and unrelated budget line items. Any increase in the HICA directly increases health insurance costs for Michigan businesses and individuals, making the voluntary effort to provide health insurance that much more difficult to maintain.

We applaud the House and Senate Subcommittee’s actions and will be encouraging the full Appropriations Committees to follow as they work to complete the Fiscal Year 2015-16 budget by the end of May. 

For more information, please contact Wendy Block at wblock@michamber.com or (517) 371-7678.