For most private health care insurance users in Michigan, including building trades union members and their families, health care costs are about to see an initial hike of at least 1 percent as a result of the new law, and down the road, likely more. Of course, that’s on top of ever-increasing health care premiums that are a fact of life for nearly everyone.

A seminar to discuss the legislation was held Aug. 10 in Detroit. Sponsored by trust fund administrator Automated Benefit Services (ABS) and the labor-management coalition group AEPC, the seminar led participants through the process of how the legislation quickly moved toward passage this year, and what it will mean to trust funds, employers, health plans and workers.

“We expected a public outcry as this bill moved along, but that never happened,” said Automated Benefit Services President Daniel Gorczyca. “We expect the cost of this will be passed through to the benefits plans and along to individuals. It’s a new penalty or a tax, and the silence regarding it has surprised me the most.”

The Michigan Senate has already adopted Senate Bill 348 just before the summer break started, and it’s likely to be adopted in a similar form by the state House when it returns to work after Labor Day, and signed into law by Gov. Rick Snyder.

The measure is in response to a loophole in the Medicaid Managed Care system that Michigan was taking advantage of – until it was phased out in 2009. The replacement plan brought in funds that came from a 6 percent Medicaid use tax on health care providers, which provides about $1.2 billion in funding for the state Medicaid system.

Now, state Republican lawmakers and Gov. Snyder want to supplant that 6 percent tax with a 1 percent tax on most health care claims made in Michigan. The obligations for administering the tax would be placed on the insurance carriers – which could bring about added costs.

The Battle Creek Enquirer had a tidy explanation for what’s going on:

“So now Michigan lawmakers are working on legislation that seeks to raise $400 million in order for the state to collect $800 million in federal dollars to help fund Michigan’s $11.5 billion Medicaid program.

“Confused? The only thing you really need to know is that if you have private health insurance, in all likelihood you’re probably going to be helping to generate that $400 million.

“As passed by the state Senate, the new legislation would assess a 1 percent fee on many health insurance claims in Michigan. That revenue would allow the state to qualify for additional federal money for Medicaid. Without those funds, the state would be left with a $1.2 billion gap in paying for health care for nearly 2 million low-income residents.

“The proposed claims fee legislation is meant to replace a 6 percent use tax that health maintenance organizations now pay, and which the federal government is expected to ban.”

Noble Kheder, a health care provider industry lobbyist in Lansing for Kheder Davis and Associates, told the seminar that he didn’t think that the legislation was another Republican shot taken at organized labor in Michigan. Rather, he said implementing this tax (although the GOP prefers a different word like “assessment”) is a way for the state to “maximize what the state can recoup” and get in line with federal rules governing the health care/Medicare billing environment.

Kheder said “there are legitimate concerns” about how the state plans to finance Medicare reimbursements going forward. He said about 1.8 million Michiganians receive benefits from Medicare, with about two-thirds being paid to aged, blind and disabled people, and the other third going to the poor and unemployed.

“You could propose an altogether different system,” Kheder said. “Why just limit yourself to claims providers?” Broadening the tax on say, pharmaceuticals or dental plans he said, would just make more areas of the economy upset at being taxed. As it is, limiting the tax to trust funds and insurance providers seems to have had the effect of tamping down outrage at the new tax.

None of the representatives of interested parties who attended the seminar expressed much hope that Senate Bill 348 could be halted in the legislature. Attorney Andy Nickelhoff told the seminar that there are some potential legal remedies for the law when it’s adopted, and the current version of the bill has a two-year sunset rule.

Instead, some inquired about how to dampen or spread out the effects of the new rule. It needs to become law by Oct. 1, Kheder said, and for the most part, he said the “ship has sailed” on arguing about it.

Gorczyca said public sector employees in Michigan are taking the biggest hit this year when it comes to taking on more health care costs – they’re already being required to pay 20 percent of the cost of their health care. “I think labor has had other issues to deal with this year,” Gorczyca said.

Suzanne Paranjpe, president of AEPC, a labor-management purchasing coalition, said the increase comes at a time when labor-management trust funds are already buffeted by low working hours, an up-and-down stock market and higher health care costs.

“Trust funds are definitely concerned,” she said. “Some, especially some in the building trades, are struggling to survive. Now we have a new cost. This is going to hurt working people and their families. That one percent is going to go back to the consumer and it’s going to be a drag on the economy of this state.”

The state Legislature has argued whether a 1 percent tax rate on health care claims is sufficient, Kheder said, with amounts like 3 percent, 5 percent or 10 percent being kicked around to help the state balance its budget.

Gorczyca of Automated Benefit Services said “the likelihood this stays at 1 percent is slim and none. The likelihood they’re going to need more than $400 million is significant.”