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Member, Beacon International Group, Ltd.
LANSING, Mich.—A new 1% state tax would be assessed on paid health care claims under legislation the Michigan Senate approved Thursday.
The tax, applied on claims incurred on or after Jan. 1, 2012, would be paid by insurers offering fully insured plans and by third-party claims administrators in the case of self-funded plans. The tax, which would be used to help fund the state’s Medicaid program, would be paid quarterly starting April 15, 2012.
Certain plans would be exempt from the tax, including Medicare Advantage plans, Medicare prescription drug plans and plans covering federal employees. In addition, the tax under S.B. 348 would not be assessed on services provided in Michigan to non-Michigan residents.
Many unaware of costs
Many employers are not aware of the measure, noted Jerry Konal, a principal with Mercer L.L.C. in Detroit. “It will be a direct cost for them,” he added.
In a letter to Michigan lawmakers, the Self-Insurance Institute of America Inc. said the proposed tax would run afoul of the Employee Retirement Income Security Act that pre-empts state and local laws and rules that relate to employee benefit plans.
“Legal precedent clearly dictates that any regulation, including fees on self-insured plans, is unlawful,” according to the letter signed by Michael Ferguson, chief operating officer of the Simpsonville, S.C.-based SIIA.
Others disagree. “I don’t think that is correct. The measure does not change or affect benefits,” said Rick Murdock, executive director of the Michigan Assn. of Health Plans in Lansing.
Legal challenge doubtful
“I would doubt there would be legal challenges,” said Jon Clement, a director with Buck Consultants L.L.C. in Southfield, Mich.
Other states with similar taxes include Maine, which is phasing out its tax, Massachusetts and New York. None has been challenged in court.
The measure, approved on a 26-9 vote, now moves to the Michigan House.
LANSING, Mich.—Ken Ross, commissioner of Michigan’s Office of Financial and Insurance Regulation, said Tuesday that he is leaving his position effective April 15.