12 December 2018

Michigan HICA Tax Officially Repealed!

As explained in our previous client alert (which can be found here), Michigan officially repealed the Health Insurance Claims Assessment (HICA) tax on June 11, 2018.  However, that repeal was conditioned on the approval of its replacement—the Insurance Provider Assessment (IPA)—by the Centers for Medicare & Medicaid Services (CMS).

On December 11, 2018, CMS notified the Michigan Department of Health and Human Services (MDHHS) that it had approved the IPA.  As a result, the HICA tax is officially repealed effective as of October 1, 2018.  Under the legislation that repealed the HICA tax, the effective date of the repeal was the later of the following dates: (1) the first day of the calendar quarter during which MDHHS was notified that the IPA was approved; and (2) October 1, 2018.  Since October 1, 2018 is the first day of the calendar quarter containing December 11, 2018—the date of CMS’s approval—the effective date of the repeal is October 1, 2018.

The HICA tax repeal should be welcome news to plan sponsors of self-funded group health plans (and those plans’ third-party administrators) because self-funded group health plans are not subject to the IPA.

On the other hand, fully insured group health plans are subject to the IPA.  (Technically, the insurers of fully insured group health plans are subject to the IPA.  But, like the HICA tax, insurers are sure to pass the cost of the IPA on to their fully insured customers.)  Because of the complexity of how the IPA is calculated, it is difficult to tell (at this time) whether the IPA will be more or less expensive to plan sponsors of fully insured group health plans. So, this is probably less exciting news to these plan sponsors (and their plans’ insurers).

If you have any questions about the repeal of the HICA tax, the IPA, or how either of these will affect your group health plan, please contact the author (or any member of the Employee Benefits Practice Group).