TOPEKA, Kan. - Kansas Attorney General Derek Schmidt filed a federal lawsuit on Thursday challenging the federal government’s legal authority to require the State of Kansas to pay a tax that finances a portion of the Affordable Care Act, also known as “Obamacare.”
Texas, Kansas and Louisiana filed suit in federal district court in Wichita Falls, Texas, against the federal government, particularly the U.S. Department of Health and Human Services and the Internal Revenue Service, seeking a court order that prevents collection of the new Health Insurance Providers Fees assessed against companies that manage state Medicaid or Children’s Health Insurance programs.
The states allege that the new fees, which are required by the Affordable Care Act and are legally required to be passed on to the states, constitute a de facto tax on state treasuries.
The federal government does not have legal authority to tax the states to raise money for the federal treasury, the states argue.
In the first year of the new tax, Kansas paid the federal government about $32.8 million. The lawsuit seeks a refund of that amount and an order prohibiting future collections of the tax from states or from companies managing state Medicaid or Children’s Health Insurance programs.
“If the federal government wants to tax and spend, it may do so within the confines of the law,” Schmidt said. “But it may not, we think, employ accounting tricks that force the states to do the taxing while the federal government does the spending. Kansas has state priorities for that $32 million that do not include financing the federal government’s operations.”
The Health Insurance Provider Fee is assessed to Medicaid or CHIP managed care organizations in order to fund Obamacare.
However, by law, states are required to reimburse the managed care organizations for this fee. Governor Sam Brownback issued the following statement on Thursday:
“The federal government is threatening to cut $1.6 billion of federal Medicaid funding affecting more than 400,000 Kansans in need unless Kansas pays millions of dollars in taxes to the federal government to support Obamacare. This is just one more instance of an overreaching federal regulation designed to coerce states into funding or participating in Obamacare. In 2015, Kansas paid more than $32 million to cover costs associated with the Health Insurance Provider Fee. This is a tax Kansans should not have to pay and is an unconstitutional overreach of federal authority.”