Chamber Supports Legislation to Repeal and Replace Health Insurance Claims Tax

May 14, 2018

The Michigan Chamber has long-sought legislation to repeal and replace Michigan’s wholly unique and uncompetitive Health Insurance Claims Tax (“HICA Tax”). Legislation introduced in the Senate last week might finally be the answer, creating a tax cut for employers purchasing health insurance for their employees. 

Legislation pushed by the Chamber in 2016 to repeal and replace the HICA tax was vetoed by Governor Snyder, who disagreed with lawmakers and the Chamber on the question of whether it met federal standards.  The veto forced us to return to the drawing board with lawmakers. 

The legislation introduced in the Michigan Senate last week (SBs 992 and 994) was drafted in collaboration with Governor Snyder’s office and would repeal the HICA Tax, which is a 1 percent tax on paid health insurance claims. It would replace the it with a new Insurance Provider Assessment (IPA) on commercial health insurers (HMOs and PPOs) and Medicaid health plans. The legislation would achieve the goal of lowering health insurance taxes for employers purchasing employer-sponsored coverage as well as those buying coverage in the individual market. Self-insured entities would be exempt from the new altogether because their policies are governed under federal law. 

The Michigan Chamber supports the Senate legislation because it allows Michigan to turn a page on the HICA Tax, which serves a disincentive to purchasing health insurance by adding over $1 billion to the cost of coverage since 2011. Furthermore, the HICA Tax has proven to be an unstable and inadequate revenue source for the state. The IPA Tax will cut health insurance taxes for employers and continue to fund Michigan’s traditional Medicaid program in a fair and stable way. 

Please contact Wendy Block with any questions at (517) 371-2100 or