Senate Committee Reports Changes to Medicaid Use Tax

Liz Gullett

May 27, 2016

This week, the Senate Michigan Competitiveness Committee reported a package of bills that would eliminate the Health Insurance Claims Assessment (HICA). HICA is a Use Tax on paid health claims, with a few exceptions, and was implemented to provide revenue for the Medicaid program. However, the revenue from the assessment failed to meet the projected amounts and provide inadequate funding for the state’s matching funds necessary to receive all available federal dollars for Medicaid. Additionally, there remains a good chance that a Federal Appeals Court would rule HICA illegal.

In order to provide the necessary $400 million needed for state match dollars, under the legislation as reported by the committee, the state would redirect income tax revenue to this program. The bills also reinstate the use tax on Health Maintenance Organizations (HMOs) to fill the gap from redirecting current revenue. “This is one of several policy changes that will be implemented as a result of the budget process. The legislature has been working through what mechanism should be used to replace HICA in the budget and legislators have been working to ensure that source provides a constant, steady, and dependable revenue stream,” explained Brendan Ringlever of MLC.

The bills moved quickly through the first stages of the legislative process, as they were introduced on Tuesday and reported from committee the following day. The four bills have been referred to the Senate floor for further consideration.

Michigan Legislative Consultants is a bipartisan lobbying firm based in Lansing, Michigan. Our team of lobbyists and procurement specialists provide a wide range of services for some of the most respected companies in America. For more on MLC, visit www.mlcmi.com or connect with us on LinkedIn and Twitter.