Michigan companies may continue paying tax on health insurance claims

One consequence of the Patient Protection and Affordable Care Act, which has been extremely beneficial to millions of Americans, is that the health care law expanded Medicaid. In doing so, it helped to cover many Americans who were previously too poor to afford health insurance themselves, but made too much money to qualify for the program before. And while the federal government originally helped fund that expansion, its assistance will dwindle in the coming years, leaving some states with difficult decisions as to how to proceed.

To that end, Michigan's plan to continue to fund its expanded Medicaid program is related to taxing businesses' health insurance claims payouts, according to a report from the Associated Press. Currently, that tax is 0.75 percent of the value of a person's claims payouts, and the state's legislature is now considering whether to extend that tax through 2020. The state's Senate, which is currently controlled by Republicans, barely got its version of the proposal passed, with a 21-17 vote.

Michigan lawmakers will soon decide on whether to extend a controversial health insurance tax bill.

What does that mean?
What currently appears to be a four-year extension of the tax is actually only going to last two years, the report said. The tax will end up going away in 2018 if the measure isn't passed, and this extension is actually something of a compromise on the matter; originally, the version of the bill that passed the state's House of Representatives called for an extension until 2025. Now, the House must re-consider the bill, given that its latest iteration cuts back the extension to which it originally agreed.

In addition, when the federal government stops allowing states to fund the Medicaid expansion through additional taxes, this bill would boost the rate at which health insurance claims are taxed to 1 percent from the previous 0.75 percent. Without that provision, spending on Medicaid could be cut in 2018, which would simply create a larger coverage gap into which people could fall.

Going forward
One of the big issues with this bill, though, is that the proposal has a lot of critics even if the idea behind it – keeping Medicaid coverage as broad as possible – is generally beneficial, the report said. The Michigan Chamber of Commerce said the measure was “a giant tax hike,” but proponents actually believe that it gives businesses cost certainty while also providing a safety net for the state's poorest residents when they need health care.

“It's been there [since 2012], so I don't think it's a [tax] increase,” Senate Majority Leader Arlan Meekhof, a Republican representing West Olive, told the news organization. Nonetheless, it's believed that Michigan Gov. Rick Snyder, also a Republican, will sign the bill in the near future.

This is just one of many issues that health insurance companies themselves will have to monitor closely as time goes on, because decisions such as these may end up having an impact on the ways in which they do business from one state to the next.