The Michigan Health Insurance Claims Assessment (“HICA”) tax has been repealed, effective as of October 1, 2018. On June 11, 2018, Governor Snyder signed a series of bills repealing the HICA tax.
However, the repeal was conditioned upon approval by the Centers for Medicare & Medicaid Services (“CMS”) of the IPA. CMS approved the IPA on December 11, 2018. As a result, the repeal of the HICA tax became effective on October 1, 2018.
The HICA tax was a 1% assessment on all paid health claims in Michigan, including claims paid by fully insured and self-funded group health plans, with some exceptions. The HICA tax has been replaced with the Insurance Provider Assessment (“IPA”). Like the HICA tax, the IPA tax will be levied on health insurers, who may then pass the cost through to employer sponsors of fully insured group health plans. Self-insured group health plans are not subject to the IPA.
The IPA is a three-tiered health insurance tax that is applied to "member months" at varying rates. Member months are defined as the total number of individuals for whom the insurance provider has recognized revenue for one month.
The amount of the IPA will depend on the provider and circumstances. The three tiers are listed below.
- Tier 1: Medicaid managed care organizations will pay a two-level tax that includes a variable and fixed rate. The variable rate will be determined each year by the Michigan Department of Health and Human Services ("MDHHS"). The variable rate will apply to a certain number of "member months," as specified each year by MDHHS. Any member months in excess of the number specified by MDHHS will be subject to a fixed rate tax of $1.20 per member month.
- Tier 2: Health insurers will be subject to a tax of $2.40 per member month for each member month that is not supported by Medicaid funds.
- Tier 3: Prepaid Inpatient Health Plans will be charged a fixed fee of $1.20 per member month for each member month that is not supported by Medicaid funds.