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Health Insurance Claims Assessment (HICA)

Health Insurance Claims Assessment (HICA). Michigan Department of Treasury February 2012. Topics. HICA Overview Registration Process Electronic Funds Transfer (EFT) Process Quarterly Payments & Worksheet Annual Return Audit Overview FAQ Process Contact Information Questions. 2.

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Health Insurance Claims Assessment (HICA)

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  1. Health Insurance Claims Assessment (HICA) Michigan Department of Treasury February 2012

  2. Topics • HICA Overview • Registration Process • Electronic Funds Transfer (EFT) Process • Quarterly Payments & Worksheet • Annual Return • Audit Overview • FAQ Process • Contact Information • Questions 2

  3. HICA Overview • On September 20, 2011, Governor Snyder signed legislation creating the Health Insurance Claims Assessment (HICA) Act (P.A. 142 of 2011). 3

  4. HICA Overview (cont.) • Why was the HICA Act enacted? • HICA was enacted to replace the current HMO Use Tax. It is intended to generate funds that will be used to leverage federal Medicaid matching funds. 4

  5. HICA Overview (cont.) • Who does the HICA Act apply to? • The HICA Act applies to certain insurance carriers, third party administrators, and self-insured entities that pay health insurance claims for Michigan residents, for health-related services performed in Michigan. The assessment is levied upon the “paid claims” of those entities. MCL §550.1733(1); MCL §§550.1732(a) and (v). 5

  6. HICA Overview (cont.) • How much is the assessment that is levied under the HICA Act? • The assessment is levied at the rate of one percent (1%) of the “paid claims” of the covered carrier, third party administrator, or self-insured entity. MCL §550.1733(1) 6

  7. HICA Overview (cont.) • What are “paid claims”? • “Paid claims” means “actual payments, net of recoveries, made to a health and medical services provider or reimbursed to an individual by a carrier, third party administrator, or excess loss carrier.” MCL §550.1732(s) 7

  8. HICA Overview (cont.) • What are “health and medical services”? • “Health and medical services” is very broadly defined under the HICA Act, and includes: • Services included in furnishing medical care, dental care, pharmaceutical benefits, or hospitalization; • Ancillary services including, but not limited to, ambulatory services and emergency and nonemergency transportation; 8

  9. HICA Overview (cont.) • Services provided by physicians (both M.D.s and D.O.s) as well as services provided by nurses, dentists, chiropractors, acupuncturists, audiologists, optometrists, speech-language therapists, pharmacists, physical therapists, podiatrists, psychologists, occupational therapists, dietitians and nutritionists, social workers, and respiratory care therapists; but not services provided by veterinarians, marriage and family therapists, athletic trainers, massage therapists, licensed professional counselors, or sanitarians; and • Behavioral health services, including, but not limited to, mental health and substance abuse services. MCL §550.1732(j) 9

  10. HICA Overview (cont.) • What things are excluded from “paid claims”? • “Paid claims” on which the assessment is levied do NOT include the following: • Claims-related expenses (see MCL §550.1732(s)(i)) • Payments for services provided before January 1, 2012; • Claims paid for services provided to nonresidents of Michigan; • Claims paid for services provided outside Michigan to Michigan residents; • Claims paid under certain federal employee health benefit plans and high risk pools; 10

  11. HICA Overview (cont.) • Claims paid under specified accident or accident-only coverage; credit, disability income, or long-term care coverage; or health-related claims under automobile insurance, homeowners insurance, farm owners insurance, commercial multi-peril insurance, worker’s compensation, or coverage issued as a supplement to liability insurance; • Claims paid under Medicare, Medicare Advantage, Medicare Part D, Tricare, the U. S. Veterans Administration and certain high risk pools established pursuant to federal law; and • Reimbursements to individuals under a flexible spending arrangement, a health savings account or other health reimbursement arrangement authorized under federal law. MCL §550.1732(s) 11

  12. HICA Overview (cont.) • Who is a Michigan resident for purposes of the HICA Act? • For purposes of the HICA Act, Treasury will consider a Michigan resident to be a person who is domiciled in the State of Michigan on the date that the service in question is performed. “Domicile” means a place where a person has his true, fixed and permanent home and principal establishment to which, whenever absent therefrom, he intends to return. Domicile continues until another permanent establishment is established. 12

  13. HICA Overview (cont.) • What happens if more than one entity is subject to the HICA Act for the same claims? • While two entities may be subject to the HICA Act for the same claims, the assessment is only owed once with respect to any single “paid claim.” The statute provides a hierarchy to determine which covered entity must actually pay the assessment. Generally, a third party administrator will be responsible for paying the assessment with respect to claims it pays on behalf of a group health plan sponsor or other carrier. MCL §550.1733(3)(a). 13

  14. HICA Overview (cont.) • How much will be collected under the HICA Act? • The legislation was designed to produce revenue of approximately $400 million per year, which is the amount needed by the State of Michigan to leverage federal Medicaid matching funds. If the HICA assessment results in more than $400 million in revenues collected in a year (subject to certain adjustments), the statute provides a mechanism for amounts over $400 million to be credited back to the entities that paid the assessment. 14

  15. HICA Notification • October 2011: Notice sent to many third party administrators, carriers and self-insured entities that may be subject to HICA. • Action required if you believe you are not subject to HICA (see FAQ #3). • Note: A self-determination you are not subject to HICA is not binding on Treasury and is subject to potential review or audit at a later date 15

  16. HICA Registration • Copy of Electronic Funds Transfer Application – Health Insurance Claims Assessment (Form 4926). • Form 4926 is used to register for all HICA payments: • Quarterly and Annual. • Available on our Web site, www.michigan.gov/businesstaxes 16

  17. HICA Registration (cont.) Form 4926: 17

  18. EFT Process • Payments are required to be submitted by Electronic Funds Transfer (EFT). • If already registered to pay other Michigan taxes by EFT,must submit Form 4926 to register for HICA and to make payments by EFT. • EFT transactions should not be initiated prior to receipt of approval from Treasury. 18

  19. EFT Process (cont.) • Two types of EFT payments • EFT Debit • Payer notifies the State of the assessment amount due. The State, through its financial institution, then initiates the transaction to debit (withdrawal of funds from) the payer’s account. • EFT Credit • Payer contacts its financial institution to initiate a transaction to transfer funds to the State’s account for the assessment amount due. 19

  20. EFT Debit Process • What to do when selecting EFT Debit: • Verify information on Form 4926 is accurate and complete. • Fax or mail completed form to Treasury. • Allow four (4) weeks for processing. • What Treasury does: • Review, process and follow up as needed. • Forward to State’s financial institution to complete processing. • State sends letter to payercontaining user code and password. 20

  21. EFT Debit Process (cont.) • Two options to initiate an EFT Debit transaction using the Michigan Automated Tax Payment System: • Web – available at www.michigan.gov/biztaxpayments • Telephone – Use a touch tone phone to call 1-877-865-2860. • Available 24/7. • Can use both options interchangeably. 21

  22. EFT Debit Process (cont.) • For timely receipt of your payment, it is necessary to enter the payment information into the Michigan Automated Tax Payment System (EFT Debit) by 9 pm, at least one business day prior to the payment due date. 22

  23. EFT Credit Process • What to do when selecting EFT Credit: • Verify information on Form 4926 is accurate and complete. • Fax or mail completed form to Treasury. • Allow four (4) weeks for processing. • What Treasury does: • Review, process and follow up as needed. • Forward to State’s financial institution to complete processing. • State sends instructions to payeron how to initiate EFT Credit transactions. 23

  24. EFT Credit Process (cont.) • Final steps you must complete: • Recommend $0.00 or $0.01 test transmission prior to first payment. • Contact your financial institution to find out what their requirements are for initiating a timely EFT Credit transaction. • Some financial institutions charge a fee for EFT Credit transactions. • Many require 24 hours notice before a transmission is completed. 24

  25. EFT Helpful Hints • Before submitting Form 4926 to Treasury, review for completeness. • Is your account number listed? • Is the form signed? • Is the Certification section complete? • Incomplete applications cannot be processed, which can extend the processing period. • Treasury will contact you if there are any questions. 25

  26. Quarterly Payments • Quarterly payments are made by EFT and are due: • April 30, July 30, October 30 and January 30 each year. • Payments due on Saturday or Sunday, legal banking holiday or State holiday for Michigan are due the next succeeding business day. • No return is required on a quarterly basis. 26

  27. Questions regarding the EFT process • Questions regarding the EFT process should be directed to: Michigan Department of Treasury EFT Unit 517-636-6925 • Additional information is also available online at www.michigan.gov/biztaxpayments 27

  28. Quarterly Worksheet • Quarterly Worksheet for Health Insurance Claims Assessment (Form 4930). • Final form will be available on Treasury’s Web site December 2011 www.michigan.gov/businesstaxes. • The worksheet is for your records and should not be submitted to Treasury. • The worksheet should be retained in your records for four (4) years after the HICA due date. 28

  29. HICA Annual Return • Annual return: Form 4931 • Due date: February 28. • First annual return due: February 28, 2013. • Generally follows the format of the HICA quarterly worksheet. • The annual return is a year end reconciliation of the quarterly payments. • Final form will be available on Treasury’s Web site in 2012 www.michigan.gov/businesstaxes. 29

  30. HICA Annual Return (cont.) • The annual return will be electronically filed (e-filed) directly to Treasury. • More information on the annual return and e-file process will be available on Treasury’s Web site, www.michigan.gov/businesstaxes at a later date. • Annual return payments are also made by EFT. • When submitting Form 4926, you should register for both quarterly and annual payments. 30

  31. General Audit Overview • Audits are conducted to verify a taxpayer has accrued and paid all applicable fees, taxes, assessments and other money designated by law. • Statutory authority allowing the Michigan Department of Treasury to conduct an audit is provided in Section 205.3 of the Revenue Act, P.A. 122 of 1941. 31

  32. General Audit Overview (cont.) • Rights During an Audit: • Ask that audit take place at a reasonable time & location. • Represent oneself, have someone with authorization accompany or have a third party present (Form 151 POA). • Receive copies of audit work papers showing how changes were determined. 32

  33. General Audit Overview (cont.) • The assigned auditor will: • Conduct a fair and impartial examination of the records. • Answer any questions that may arise during the course of the audit. • Explain the audit findings and the alternatives available if there is disagreement with the findings. • Honor your right to confidentiality. 33

  34. Examination of Records • The auditor must examine certain records, including but not limited to: • General ledgers, financial statements and other supporting books and records. • Quarterly worksheets and annual returns. • Source documents used to prepare returns. • Electronic records. 34

  35. Examination of Records (cont.) • The Revenue Act requires that all records requested by the auditor that are necessary to perform the audit be furnished. • Treasury Auditors employ methods that use electronic or computer-readable data files. This method is accurate and generally reduces audit time. 35

  36. Audit Methods • Detail audit – the auditor may examine all business records for an audit period. • Sample audit – the auditor may use sampling methods. 36

  37. Statute of Limitations • Four years for the HICA administered by Treasury. • An audit normally covers the most recent four-year period. • HICA liabilities may be assessed for any period if a payment was not received or a return was not filed. 37

  38. Notification of Audit Determination • Notice of Preliminary Audit Determination (NOPAD). • Final Audit Determination Letter – approximately 60 days after NOPAD. • Notice of Intent to Assess – issued if payment was not made after the NOPAD. 38

  39. Notification of Audit Determination (cont.) • Bill for Taxes Due (Final Assessment) is issued 60 days after the Notice: • Unless amount is paid in full. • An informal conference has been requested. • Treasury has received information to correct the amount due. • Payments may be made any time during the billing process. Payment arrangements may be requested from the Collections Division. 39

  40. Penalty and Interest • Interest and/or penalty will apply as long as there is a balance due. • Penalty on an assessment may be waived if reasonable cause for failure to pay on time is demonstrated. (RAB 2005-3) 40

  41. The Appeals Process • Informal Conference – request in writing within 60 days of the date on the Notice. • The Michigan Tax Tribunal or Court of Claims – Final decision or assessment may be appealed to: • The Michigan Tax Tribunal - within 35 days and requires payment of the undisputed amount. • The Court of Claims – within 90 days and requires full payments of the assessment. 41

  42. Non-Payment of Tax Balance • Treasury may take collection action to secure payment, including: • Liens on real and personal property. • Wage levy. • Financial institution levy. • Offsets. • Other - including freezing assets and restricting property transfer. 42

  43. Contact Information • For questions about liabilities that have been assessed contact: Collections Division 517-636-5265 43

  44. FAQ Process • If you have questions following the seminar, please submit those questions via email to the following address: Treas_Tax_Policy@michigan.gov • All questions will be reviewed and will be considered for inclusion in the HICA Act FAQs on Treasury’s website. FAQs will be added on a regular basis, so please check back often. www.michigan.gov/businesstaxes 44

  45. Treasury Contact Information • Substantive questions regarding the HICA Act should be directed to: Michigan Department of Treasury Technical Services Section 517-636-4357 Treas_Tax_Policy@michigan.gov 45

  46. OFIR Contact Information • Office of Financial and Insurance Regulation (OFIR) 1-877-999-6442 46

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