Michigan Chamber Tackles Proposal to Increase Health Insurance Taxes

March 15, 2015

The Michigan Chamber challenged Gov. Snyder’s proposal to increase taxes on health insurance purchasers head-on last week in testimony before the Department of Community Health Appropriations Subcommittee in the State House. We voiced our strong opposition to the Governor’s proposal to increase the Health Insurance Claims (HICA) tax from a .75 percent tax on paid health insurance claims to a 1.3 percent tax.

The Governor’s proposal would not only increase the HICA tax, but it would also retain Michigan’s Use Tax on Medicaid Managed Care Organizations (MCOs) and remove an important safeguard in current law specifying that the HICA and Use Tax together could collect no more than $450 million. 

By removing the revenue cap, the Governor’s proposal 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.

We agree 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 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 will continue to voice our strong opposition to this budget provision and will keep you posted on our progress. For more information, please contact Wendy Block at wblock@michamber.com or (517) 371-7678.