Reducing Taxes on Health Insurance Claims

The Issue:

Repeal of Michigan's wholly unique and uncompetitive Health Insurance Claims Assessment, or “HICA Tax,” has long been a priority for the Michigan Chamber because the tax makes it more costly and difficult for individuals and employers to purchase health insurance. The HICA Tax is a one percent tax on paid health insurance claims. It is paid by individuals and businesses alike and has added over $1 billion to the cost of health insurance since its enactment.

The HICA Tax was hurriedly put into place in 2011 because the Use Tax on Medicaid Managed Care Organizations was subject to federal scrutiny and it was thought it would be deemed an impermissible mechanism to draw down federal dollars to help fund Michigan's traditional Medicaid program. Six years later, we can safely say the HICA Tax has been a total flop, as it not only has added over $1 billion to the cost of health insurance, but also has proven to be an unstable and inadequate revenue source for the state.  

The Michigan Chamber pushed through legislation in 2016 to restructure the existing Use Tax on Medicaid Managed Care Organizations (MCOs) by bringing the tax into compliance with federal law. In doing so, the state could have repealed the HICA Tax, fully preserved necessary funding for Michigan’s traditional Medicaid program and boosted the School Aid Fund by over $150 million. Unfortunately, Governor Snyder vetoed SBs 987-990 of 2016, meaning the state will face an annual shortfall for the traditional Medicaid budget in Fiscal Year 2017 and beyond and a fiscal cliff in 2020 when the current HICA tax expires, leaving the state with a $332.5 million annual shortfall.

Where We Stand:

While we were disappointed with the veto, the Michigan Chamber will continue to support efforts to repeal Michigan's uncompetitive and punitive HICA Tax as it adds to the cost of employer-sponsored health insurance.  

Staff Contact: 
Wendy Block
Director of Health Policy & Human Resources
(517) 371-7678
Legislative Proposals: 

Senate Bills 28, 29, 30, 31, 32 of 2017

Previously Passed or Defeated:

  • Senate Bills 987-990 of 2016 - Vetoed
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