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Industry Insider

By Delaney Newberry
Director of Human Resource Policy
Michigan Manufacturers Association

Proposed legislation to levy a new tax on health insurance claims as a way to match federal Medicaid funding has been on the back burner in Lansing while the Legislature took on big issues like business tax reform. Now that a number of key reforms are on the books and a balanced budget has been completed, including an assumed $400 million in revenue from the new tax, it appears that the Legislature will now turn their focus to the mechanics of SB 347 and 348, which would levy a 1-percent tax on all health and dental claims paid by employers and individuals.

Michigan currently uses tax assessments on various healthcare provider entities to leverage federal Medicaid matching funds. There is a question as to whether the federal government will allow us to continue to use those methods. That’s where SBs 347-348 come in. The 1-percent tax on health insurance claims created by the legislation would replace the revenue provided by the Medicaid HMO Use Tax.

The Michigan Manufacturers Association (MMA) has been working closely with legislators and the Snyder administration since the proposal first surfaced as part of the governor’s budget recommendations for fiscal years 2012-2013. For years, MMA has worked to educate legislators on the impact of the rising cost of healthcare on manufacturers — a sector that offers more and better benefits than other sectors. Ninety-one percent of manufacturers offer healthcare benefits to their employees, compared to 71 percent of all other industries and just 38 percent of businesses in the leisure and hospitality industries.

After forming a special member subcommittee to look closely at the proposed Health Care Claims Tax, MMA came to the conclusion that ultimately the cost of the newly proposed tax would be borne by the employer or the individual who pays for the coverage. As one of the largest payers of private insurance, group health plans and workers’ compensation benefits, the brunt of the new Health Care Claims Tax would fall disproportionately on manufacturers.

In a position paper that has been circulated to legislators and the Snyder administration, MMA outlined the association’s concerns regarding the new tax and offered solutions to address those concerns. MMA’s recommendations aim to constrain the size and scope of the proposed tax and try to eliminate the disproportionate impact of the tax on manufacturers. Their recommendations include:

• Blocking expansion of the tax to workers’ compensation benefits;
• Delaying the onset of the new tax until after the federal government disallows the current Medicaid match funding mechanism;
• Amending unreasonable monthly filing provisions;
• Capping the total amount of revenue collected by the tax to target the minimum required for the federal match;
• Capping the tax each company would have to pay for this tax to ensure that companies are not penalized for growing and offering benefits to their employees;
• Capping the tax a company would have to pay per individual claimant per calendar year to ensure that companies are not punished for employing individuals with chronic conditions or who fall victim to catastrophic accidents;
• Sun-setting the new tax on a date certain to ensure accountability; and
• Requiring reporting and benchmarking to ensure the tax revenues do not exceed required amounts and to allow evaluation of fairness of the tax.

Manufacturing is experiencing growth and continuation of this trend is vital to the continued recovery of Michigan’s economy. Manufacturers should be able to invest their dollars in the state and hire more Michigan workers. MMA is working to eliminate the disproportionate burden this new tax would place on manufacturers.

The bills have been referred to the Senate Appropriations Committee and may see legislative action this month. Senate Appropriations Committee Chairman and bill sponsor Sen. Roger Kahn (R-Saginaw) has said that he is taking MMA’s concerns seriously and will consider amending them to incorporate MMA’s recommendations.

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