December 6, 2012

Health Care Financing in the States: New York and Michigan

New York – Surcharge Assessments

In 1996, the state of New York enacted a health care financing law, a significant part of which is a tax on certain services, specifically, hospital and related services.  A surcharge is assessed on hospitals, third party payors, including insurers, third party administrators and self-funded plans, as well as individuals/patients.  The monies garnered from the surcharge on claims are used to fund an indigent care pool; and, the monies collected on assessments on covered lives are used to fund a professional education pool.

This tax can be paid at the point of service, or it can be paid periodically, to the New York Department of Health, based on past utilization. If the tax is paid at the point of service, an additional surcharge would be assessed.

Entities subject to the surcharges and assessment are required to file monthly forms reporting its patient service payments, its surcharge obligations for the month, and the total liability for covered lives. 

The New York Department of Health has posted information on its website, including FAQs and updates, as well as information relating to filings and assessment rates, specific for the upcoming calendar year:

  • 2013 Regional Covered Lives Assessment Rates
  • Covered Lives Enrollment Option for 2013
  • Eligibility for Annual Reporting for 2013
  • Change in Filing Status for Annual Reporting for 2013

Michigan – Health Insurance Claims Assessments

To augment funds available for Medicaid expenditures, Michigan imposes a tax equaling 1% of paid health claims. The assessment is paid by insurers, third party administrators, and excess stop loss insurers. Exempt from the law are reimbursement plans such as flexible medical spending accounts, health reimbursement accounts and health savings accounts.

Generally, employers are not directly obligated to pay the assessment. However, if the employer self-administers a self funded plan, the employer would be responsible.

Collection of the assessment began on claims incurred on or after January 1, 2012. Insurers and third party administrators must file returns and pay the required assessment for the preceding calendar quarter on April 30, July 30, October 30, and January 30 of each year.

Insurers and third party administrators are required to retain the records related to the return and associated assessment for a period of 4 years after the assessment is due.

Additional information and FAQs about it can be found on the Michigan’s Department of Treasury website: Business Taxes - Health Insurance Claims Assessment (HICA) Act.


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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