EAM Applauds Passage of 25% Reduction in HICA Tax

House Passes Senate Bills 893/913 – A Positive Step to Lower Health Care Costs

May 27, 2014

Lansing, MI: Today the Michigan House of Representatives approved a 25% reduction in the Health Insurance Claims Assessment Act (HICA) and reinstated the Use Tax, applying to Medicaid HMO’s, saving Michigan health care purchaser’s money and lowering health care costs. EAM’s President, Bret Jackson, believes current health care expenses are hurting job providers and workers and these bills help continue to improve the business environment in Michigan.

Senate Bill 913 amends the Health Insurance Claims Assessment Act to reduce the HICA rate from 1.0% to 0.75%, effective July 1st, 2014. What does this mean for Michigan? A savings in health care costs. An example within the manufacturing industry puts this saving into perspective. According to the U.S. Census Bureau, Michigan ranks sixth in the country for jobs in the manufacturing industry with 722,680 employees.⃰ If the HICA tax is $45 annually per employee at 1%, then the total manufacturing industry pays $32.5 million. The 25% rate reduction will give over an $8.1 million boost in the manufacturing industry alone.

Senate Bill 893 amends the Use Tax Act to reinstate the Use Tax for Medicaid managed care organizations. This bill will apply a 6% Use Tax retroactive April 1st, 2014.

The combination of Senate Bills 893 and 913 will help Michigan meet mandates to obtain federal Medicaid matching funds. Plus, they cut health care costs and save the state from having to use general fund money to cover a revenue shortfall. In addition, if both taxes net more than $400 million, a credit will be issued to health care purchasers.

Jackson, applauds the bills stating, “It’s a good start in reducing Michigan’s health care expenses. The HICA tax is passed directly to the businesses and individuals that pay for health insurance and a tax reduction allows for the growth of jobs and wages, plus attracts manufacturers to set-up shop in our state.”

For more information regarding Senate Bills 893 and 913 and how they affect Michigan, please contact The Economic Alliance for Michigan at (248) 596-1006 or EconomicAlliance@eamonline.org.

⃰ U.S. Census Bureau 2008-2012 American Community Survey