House Looks to Extend the Health Insurance Claims (HICA) Tax—Again

October 27, 2015

The debate over whether to extend the Health Insurance Claims (HICA) Tax is back -- and it could easily turn into another fight over whether to increase the tax rate employers and individuals pay when purchasing health insurance. 

House Bill 5014, introduced by Rep. Howrylak (R-Troy) on October 22, reopens an issue we had hoped was dead. The legislation would extend the assessment of the HICA tax - which is now set to expire at the end of 2017 - indefinitely. The HICA tax is a 0.75 percent tax on all paid health insurance claims, including self-insured plans. It is ultimately paid by businesses and individuals purchasing health insurance.

Michigan’s unique and uncompetitive HICA tax already costs more than $237 million annually. Revenue generated by the HICA tax are used to fund Michigan’s Medicaid program and draw down federal matching funds. 

House Bill 5014 could easily serve as a vehicle to raise the HICA tax rate. In the past, lawmakers and the Governor have worked to vastly expand the HICA Tax. If the tax were increased from 0.75 percent to 1.0 percent, as has been proposed in the past, businesses and individuals purchasing health insurance will be hit with an additional $77 million tax increase annually on top of their current HICA burden. If it were to be raised to 1.3 percent, as proposed by Governor Snyder in his 2015 budget recommendation, businesses and individuals purchasing health insurance will be hit with an increased $170 million annual tax liability. 

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 - or raise - taxes on health insurance claims to do so. Plain and simple, the HICA tax makes it more costly for employers and individuals to do their best to protect their health and financial security by purchasing health insurance coverage.

As we have with similar proposals in the past, the Michigan Chamber will voice strong opposition to this proposal and continue to discuss alternatives to extending and/or raising this dangerous tax. 

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