The Self-Insurance Institute of America (SIIA) is challenging a new law in Michigan that would impose a 1% tax on paid health insurance claims beginning January, 2012. According to the law, the money collected from the tax will go to the state’s Medicaid program. The program would use part of the money to help cover the cost of claims and administrative fees stemming from participating insurance companies. The tax would generate $400 million in annual revenue for the state, but the Self-Insurance Institute claims that it violates federal law.
According to the lawsuit filed by the SIIA, the state tax conflicts with the federal Employee Retirement Income Security Act. The federal law disallows state authorities to determine how self-insurance plans can be administered. Michigan’s law would have some significant affects on how self-insurers conduct their business, but legislators say that these changes are not unmanageable.
Similar laws exist in other states, including New York and Massachusetts. These laws have never before been challenged in court, which means that the SIIA has a long legal battle ahead as there is currently no precedent to dictate the course of litigation. The group claims that the new law imposes too many changes upon self-insurers with not enough benefit. SIIA claims that the law could also push insurance rates higher as insurers attempt to offset the impact of the new tax.