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Michigan health care claims tax extended to 2020

Posted On: Mar. 16, 2016 12:00 AM CST

Legislation signed Tuesday by Michigan Gov. Rick Snyder will extend and raise the state's controversial health care claims tax.

Under the measure, H.B. 5105, the state's current 0.75% tax on health care claims, which is imposed on health insurers offering fully insured plans and third party administrators of self-insured plans, will be boosted to 1%. In addition, the tax will remain in effect to July 1, 2020. Prior to the legislative change, the tax was scheduled to expire on Dec. 31, 2017.

The future of the claims tax, though, is in doubt. The Self-Insurance Institute of America earlier filed suit in federal court arguing the tax ran afoul of a provision in the Employee Retirement Income Security Act that pre-empts state and local laws that relate to employee benefit plans.

First, a U.S. District Court in Michigan and later the 6th U.S. Circuit Court of Appeals in Cincinnati upheld the tax.

The SIIA then asked the U.S. Supreme Court to review the lower court ruling. But earlier this month, the Supreme Court sent the case back to the 6th Circuit to reconsider its earlier decision.

The justices said further reconsideration of the case by the appeals court was necessary in light of the high court decision this month saying a Vermont law that had required employers to provide health care claims information to state regulators was pre-empted by ERISA.

The Michigan tax, approved by state lawmakers in 2011, is intended to raise several hundred million dollars a year to help fund Michigan's Medicaid program.