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CMS Approves the Repeal and Replacement of the Michigan Health Insurance Claims Assessment (“HICA”) Tax

The Michigan Health Insurance Claims Assessment (“HICA”) tax has been repealed, effective as of October 1, 2018.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.

If you have any questions about the repeal of HICA, the implementation of IPA, or issues related to health insurance in Michigan, please contact a member of Foster Swift’s health care law practice group.

Categories: Health Care Reform, Medicare/Medicaid, Tax

 has particular expertise in health law and she represents providers with emphasis in the areas of physicians, hospice, home care and long term care, including one of the country’s largest long-term care organizations. She has a vast array of experience in teaming with providers in the areas of regulatory compliance and contracts. 

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Best Lawyers® 2021

Congratulations to the attorneys of the Health Care practice group at Foster Swift Collins & Smith, PC for their inclusion in the Best Lawyers in America 2021 edition. Firm-wide, 44 lawyers were listed. Best Lawyers lists are compiled based on an exhaustive peer-review evaluation and as lawyers are not required or allowed to pay a fee to be listed; inclusion in Best Lawyers is considered a singular honor. Health Care practice group members listed in Best Lawyers are as follows:

To see the full list of Foster Swift attorneys listed in Best Lawyers 2021, click here.