HICA Tax Passes Federal Judicial Scrutiny

On July 1, a U.S. Federal Appeals court upheld a lower court ruling that Michigan's Health Insurance Claims Assessment (HICA) Tax—a broad-based tax on paid health claims—does not violate the Supremacy Clause of the U.S. Constitution and the Employee Retirement Income Security Act's (ERISA's) pre-emption provisions. The ruling in Self Insurance Institute of America v. Rick Snyder comes as the state continues to explore alternatives to the tax, which has failed to generate enough revenue to meet expectations, despite legislative approval earlier this year of an extension through 2020.

Just prior to adjournment in June, the Michigan Senate approved Senate Bills 987, 988, 989 and 990, an alternative to HICA that would create a new version of the Medicaid Managed Care Use Tax. Under these bills, revenue from the tax could not be used for Medicaid programs; instead, Medicaid managed care actuarial soundness payments would be reimbursed through income tax revenue. Despite unanimous passage in the Senate, consideration in the House remains uncertain.