United States: Michigan's Health Insurance Claims Assessment Act

Michigan's Health Insurance Claims Assessment Act (the "Act") was approved by Governor Snyder on September 20, 2011 and given immediate effect.  Pursuant to the Act, for dates of service beginning on or after January 1, 2012, every carrier, stop-loss insurer and third party administrator ("TPA"), as those terms are defined in the Act, will be assessed a tax of 1% on "paid claims."

The term "paid claims" includes actual payments, net of recoveries, made to a health and medical services provider or reimbursement to an individual by a carrier, TPA, or stop-loss insurer.  If a carrier or TPA is contractually entitled to withhold a certain amount from payments that are due to providers of health and medical services in order to help ensure that the providers can fulfill any financial obligations they may have under a managed care risk arrangement, the full amounts due the providers before that amount is withheld shall be included in paid claims.

Casualty insurance payments, such as medical coverage for automobile insurance and workers' compensation insurance, are among those items exempt from the Act.  Also exempt are out-of-pocket medical expenses and reimbursements to individuals under flexible spending accounts, health savings accounts, health reimbursement arrangements and Archer medical savings accounts.  The Act contains additional exemptions.

Each carrier and TPA with paid claims must file with Michigan Department of Treasury on April 30, July 30, October 30, and January 30 of each year a return for the preceding calendar quarter and must pay the required assessment at that time.  If an assessment paid in any given quarter later becomes inaccurate due to subsequent claims adjustments or recoveries, subsequent filings must be adjusted to accurately reflect the correct assessment based on actual claims paid.

For a self-funded employer group health plan that utilizes the services of a TPA or stop-loss insurer, the group health plan sponsor is not responsible for an assessment under the Act for a paid claim if the assessment on that claim has been paid by the TPA or stop-loss insurer.  The TPA is responsible for all assessments on paid claims that were paid by the TPA.  The stop-loss insurer is responsible for all assessments on paid claims paid by the stop-loss insurer.  Self-funded and self-administered employer group health plans are responsible for their own compliance under the Act. 

If you have specific questions regarding application of this Act, please contact Attorney Johanna M. Novak. 

Authored November 14, 2011. Published in Foster Swift Employment, Labor & Benefits E-News and Foster Swift Health Care Law E-News.

©2011, Foster Swift Collins & Smith, PC.

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