Michigan Repeals HICA Tax



Governor Synder signed legislation to repeal the Michigan Health Insurance Claims Tax (HICA), Senate Bills 992-994 with immediate effect as Public Act 173 of 2018, on June 11, 2018.

The HICA was originally passed in 2011 and accessed a one percent tax on all health care claims paid in the State. The law was amended in 2014 to reduce the HICA rate on paid claims from 1% to 0.75% for service beginning July 1, 2014 through December 31, 2016. Another amendment changed the HICA rate back to the 1% of paid claims, effective January 1, 2017.

Revenue of the HICA tax was earmarked to support Michigan's Medicaid program and was scheduled to sunset on July 1, 2020.

Next Steps

Effective October 1, 2018, HICA is being replaced with an Insurance Provider Assessment (IPA) tax for full-insured employer groups and individual insurance members. The new IPA tax is a flat rate of $2.40 instead of a percentage of claims, which averaged over $3.00 per member per month. In addition Medicaid and Medigap rates will no longer be included in the assessment.

When is the Change Expected?

The legislation requires the Michigan Department of Health and Human Services to file a request for a waiver from the Centers for Medicare & Medicaid Services (CMS). Once granted approval, HICA would be officially repealed and replaced by the IPA, on or before October 1, 2018.

Note that self-funded employer group are exempt from the IPA tax.

AJM Associates will continue to monitor the changes and opportunities for clients through this transition as well as monitor all regulatory actions both on the State and Federal level.

Want to learn more? Contact us at info@ajmassoc.com

Information contained in this Associate Release is not intended to render tax or legal advice. Employers should consult with qualified legal and/or tax counsel for guidance with respect to matters of law, tax and related regulations. AJM Associates, Inc. provides comprehensive benefits advice and administrative services with respect to all forms of employee benefits, individual insurance, Medicare, and ancillary coverage services. For additional information about our services, please contact us at www.ajmassoc.com

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