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HICA legislation clears Legislature, heads to Snyder’s desk

Sen. Ken Horn

Sen. Ken Horn

LANSING, Mich. — The state Senate on Thursday gave final approval to a package of bills that would repeal Michigan’s Health Insurance Claims Assessment, or “HICA” tax. HICA is a tax on health insurance claims paid by both individual policy holders and businesses who offer health care insurance to employees.

Michigan has struggled for years to adequately fund Medicaid with a program that meets federal muster. The plan passed by the Senate on Thursday is a long-term, sustainable solution to a highly complex and sometimes controversial issue.

“The bills my colleagues and I put forward solve a huge problem in the state budget and eliminate an incredibly burdensome health care tax on individuals and businesses,” Horn said.  “The plan represents a bipartisan, common sense solution, guarantees Medicaid funding, and eliminates a dire situation in the state budget in the years ahead.”

Senate Bills 987-990, which were introduced in early 2016, restructure the way Health Maintenance Organizations (HMOs) and Medicaid are funded. The package earmarks income tax revenue to generate funds needed to receive federal funding for Medicaid. The income tax was chosen because it is the state’s most broadly collected tax, which would alleviate the federal government’s concerns that the currently collected tax is too narrow to meet the requirements for federal funding. Existing use tax collections would be used separately to fund non-Medicaid programs.

“Encouraging employers to offer health care benefits, while taxing the heck out of them has had the exact opposite result,” insisted Horn. “With this plan we make it easier to afford health care and we throw a lifeline to the Michigan budget while protecting Michigan’s most vulnerable residents. After the 37-0 vote in the Senate today, we hope the governor acts quickly to sign it into law.”

Delaney McKinley, director of human resource policy and membership development for the Michigan Manufacturers Association, agreed.

“These bills will be a massive financial relief to both businesses and consumers who purchase health insurance,” McKinley said. “Since 2011, the HICA tax has resulted in nearly a billion-dollar increase to the cost of health care that our state’s job providers and taxpayers have had to absorb. We need to encourage our job providers to expand, not punish them with taxes. Senate Bills 987 through 990 would remove the health care tax burden on businesses and individuals, increase funding to the School Aid Fund and addresses the concerns of the federal government.”

MMA was not alone in their praise of the legislation. Several other business organizations, including the Michigan Chamber of Commerce, have long voiced their support of a HICA repeal.

“Repealing Michigan’s HICA Tax has been a longtime priority for the Michigan Chamber because it drives up health care costs for businesses,” said Wendy Block, Director of Health Policy and Human Resources at the Michigan Chamber. “The bills are a win for private individuals and businesses who will see their health insurance premiums drop, for Michigan because the state can continue to collect use tax revenues and use those revenues for budget priorities, and for those serving the Medicaid population, or receiving Medicaid services, because this legislation guarantees a stable revenue source for the program.”

Horn agreed that these bills are a victory for all parties involved.

“It addresses the federal government’s concerns, helps Michigan residents by guaranteeing a consistent stream of money to fund Medicaid and doesn’t allow other parts of our budget to suffer,” Horn said.