Michigan Association of Health Plans

HICA tax passes muster

By Dominick Pallone, Deputy Director

MAHP was very pleased to get word recently that Michigan’s Health Insurance Claims Assessment (HICA) tax has passed muster with the 6th U.S. Circuit Court of Appeals, which ruled that the tax did not violate the federal Employee Retirement Income Security Act by taxing self-insured entities in the same way it affects insurance companies.

The tax helps Michigan provide matching funds to maximize its federal Medicaid appropriation. It is a tax on the claims paid by insurers – regardless of whether they are insurance companies, like MAHP members, or self-insured operations, like many large companies.

HICA was approved by the Legislature in 2011, to address concerns that the previous funding plan – a specific tax on medical services to Medicaid beneficiaries – might not meet federal requirements that taxes used to support Medicaid must be applied evenly to an entire provider group. HICA has not raised sufficient revenue by itself, and previous concerns have subsided, so the state has reinstated the tax on medical services for Medicaid beneficiaries and reduced the HICA tax – equating to a tax cut to businesses.

But the key issue is coming up with money to meet the state’s maximum federal appropriation. Having HICA in place assures that for the time being. It can be expected, however, that the self-insuring operations will seek further review, possibly in the Supreme Court. Watch this space for updates. You can read the opinion here.