Michigan job providers oppose eleventh-hour health claims tax increase

The Small Business Association of Michigan, along with five other of the state’s leading advocate organizations representing Michigan job providers, joined together to oppose efforts to increase health insurance costs for Michigan businesses and consumers by expanding the newly-enacted Health Insurance Claims (HICA) Tax.

SB 1359 (Senator Roger Kahn, R-Saginaw) would vastly expand the HICA Tax from a one percent tax on paid health insurance claims to a variable rate tax, whereby unelected Treasury officials will determine the tax rate in order to collect enough revenue to meet the Medicaid “base need” plus the medical rate of inflation. SB 1359 also repeals important safeguards in current law that allows for a proportional credit/refund if revenues exceed projections.

“Businesses cannot operate in a state where there is no certainty in their tax obligations,” said Dave Jessup, director of government relations for the Small Business Association of Michigan. The vice president for government relations at the Michigan Business and Professional Association Bonnie Bochniak added “Currently, businesses provide health care to employees on a voluntary basis. Increasing taxes on health care claims is a disincentive to providing health care.”

HICA was passed in 2011 as a replacement for the HMO Use Tax, which was the subject of federal scrutiny. The revenue from the HICA Tax is used to meet federal match requirements to fund Michigan’s Medicaid program. While this tax has been in place less than one year, it has not met revenue expectations. Data has not been analyzed to determine why the HICA Tax is collecting less than projected and it is unclear whether the state has done due diligence in collecting the current tax from all taxpayers. Michigan Manufacturers Association director of human resource policy Delaney McKinley commented, “It is premature to increase this tax particularly if non-compliance is still high.”

The Grand Rapids Chamber of Commerce, Michigan Chamber of Commerce, Michigan Manufacturers Association, NFIB – Michigan, Michigan Business and Professional Association and the Small Business Association of Michigan are opposed to SB 1359 because it provides for a completely uncapped, unlimited and unpredictable tax rate and because of concerns that the state has not fully enforced the current tax law.

The groups say that the cost of health care is a primary concern for Michigan businesses. According to a recently released study by Mercer, Inc., Michigan’s health benefit costs rose 5.4 percent in 2012 to $10,122 per employee. Andy Johnston, vice president of government affairs at the Grand Rapids Area Chamber of Commerce said that “Increasing taxes to an unlimited and unseen amount will be detrimental to job-providers and to Michigan’s competitiveness.”

Grand Rapids Chamber, Michigan Chamber, MMA, NFIB, MBPA and SBAM are urging legislators to oppose efforts to pass the legislation during the Lame Duck legislative session. Tricia Kinley, senior director of tax and regulatory reform for the Michigan Chamber of Commerce asked for additional legislative scrutiny, “Please don’t walk job providers off the health insurance cliff by passing this job-killing tax.”