The Senate Thursday passed legislation to repeal the Health Insurance Claims Assessment and replace the critical source of Medicaid funding with a different mechanism. The bills now await Governor Rick Snyder’s approval.

SB 987SB 988SB 989, and SB 990 establish that instead of the HICA, a 1 percent tax on all health insurance claims, revenues to draw down federal Medicaid matching funds will come from the General Fund. Revenues from the reinstated use tax on Medicaid’s HMOs would go toward non-Medicaid purposes. HICA expires December 31, 2018, however the tax rate would drop to 0 percent January 1, 2017 pending the federal government agreement to reimburse the state for the Medicaid General Fund support.

The State Budget Office has voiced concern regarding the legislation. The Senate Fiscal Agency reported the bills would reduce the General Fund by $80 million to $90 million per year but increase School Aid Fund revenues by $210 million to $220 million per year. If the federal government disallows a revised tax structure supporting the state’s Medicaid program, it would cost the General Fund $255.9 million in the 2018-19 fiscal year. Business groups have urged the governor to sign the legislation as soon as possible; Jim Holcomb, senior VP for business advocacy for the Michigan Chamber of Commerce, urged Governor Snyder to sign this “common sense and bipartisan legislation” that repeals a tax that makes it more costly and difficult for individuals and employers to purchase health insurance.

Senator Ken Horn (R-Frankenmuth), one of the sponsors of the legislation, commented he has received mixed signals from the governor’s office at this point, although no specific concerns have been brought to light.