Michigan taxes health insurance claim payments

Michigan Governor Rick Snyder signed new laws yesterday that are focused on the state’s health care system. The new rules will impose a 1% tax on all health care claims paid in the state and use that money to provide health care for low-income residents. A second bill makes the state eligible for $780 million in additional federal funding to pay for health care for low-income residents.

Snyder, a Republican, worked with state lawmakers on the measures and agreed to them as part of the effort to balance the state’s budget overall. In addition to the new tax, the state ended a 6% use tax on Medicaid managed care organizations. The blanket 1% tax on all payments is expected to cover some of the losses from eliminating the use tax.

The 1% tax will go into effect on January 1. Medicare Advantage plans, Medicare prescription drug plans, as well as co-payments will be exempted from the 1% tax. The new rules will also help Michigan work toward full compliance with federal health care reform requirements.

“I’m proud we were able to preserve Medicaid funding at a time when the state is facing significant budget challenges,” Snyder said. “The fact that we did not cut Medicaid funding shows that Michigan is committed to protecting our most vulnerable residents.”