The 0.75 percent HICA tax on paid healthcare claims was created in 2011 to increase federal funding for Michigan’s Medicaid program. Instead, the tax added $1 billion to the cost of health insurance for both individuals and businesses.
“Five years later, we can safely say the HICA Tax has been a failed exercise, as it not only disincentives the purchase of health insurance but also has been proven to be an unstable and inadequate revenue source for the state,” said the state’s Director of Health Policy & Human Resources Wendy Block.
The state senate has introduced legislation to help ensure the repeal of the HICA tax doesn’t have a negative impact on the state’s budget. The new bills would reconstruct the use tax on Medicaid managed care organizations and bring the tax into compliance with federal law.
Under the legislation, the HICA rate would drop to 0 percent on Jan. 1, 2017, and be eradicated by Dec. 31, 2018.
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