Health insurance tax extended over objections

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — The Republican-led state Legislature on Wednesday voted to extend a health insurance claims tax fiercely opposed by business groups, including the Michigan Chamber of Commerce.

The Senate, in a narrow 21-17 vote, approved a plan to continue the Health Insurance Claims Assessment through July of 2020 rather than allowing it to lapse at the end of 2017. The House gave final approval three hours later, sending the bill to Gov. Rick Snyder’s desk in a 77-25 vote.

The tax is paid by insurance carriers, third-party administrators and employers. It helps support Medicaid coverage for lower-income residents, and Snyder had warned that expiration could cause significant budget problems for the state.

The House had voted in December to extend the tax through 2025, but Majority Leader Arlan Meekhof said he believes the shorter three-year extension will give lawmakers time to find a “better” alternative.

“We think it’s important to look at a long term solution, and we believe this gives us an opportunity to do that,” Meekhof, R-West Olive, said after the vote. “A number of folks have stepped forward to volunteer to find that solution.”

House Appropriations Chairman Al Pscholka, R-Stevensville, who had originally proposed the 2025 extension, called the shorter version “acceptable.”

Snyder and the state legislature created the broad health claims tax in 2011 after the federal government objected to more narrow versions. The extension is projected to generate $247.5 million in fiscal year 2018, $340 million in 2019 and $262.5 million in 2020, according to the Senate Fiscal Agency.

The Michigan Chamber has hammered past extension proposals as a “tax increase,” but the group welcomed the shorter Senate version and Meekhof’s commitment to explore alternatives.

“The Senate proposal is a temporary, stop-gap measure that creates a path to eventual repeal of the HICA Tax,” Chamber lobbyist Wendy Block said in an email. “We remain focused on working with lawmakers to see the HICA Tax repealed once and for all because it truly would make health insurance more affordable for businesses and individuals alike.”

Sen. Patrick Colbeck of Canton, one of seven Republicans who voted against the revised bill in the upper chamber, spoke out on the House floor and repeated his criticism of the state’s Medicaid expansion under the Affordable Care Act.

“Now, instead of looking at ways to provide better quality to our services, we’re looking to increase taxes,” Colbeck said. “I’m just concerned that this is a repeated pattern where we do not look at ways of delivering services in more efficient ways.”

While House Democrats were split on the measure, most Senate Democrats voted against the bill.

“We wanted a full and complete fix,” said Senate Minority Leader Jim Ananich, D-Flint. He suggested Republicans had agreed to vote on the extension as part of road funding negotiations last year.

“Folks that voted for the roads plan, they may have voted no today, but they’re supporting another tax increase to fix the failed program. I wasn’t part of the deal with the governor.”