Six states are suing the Obama administration over the Health Insurance Providers Fee — a fee assigned to health insurers to cover federal subsidies as part of the Affordable Care Act.
The federal government determined states must pay a portion of the fee to Medicaid managed care organizations, which then pay the federal government. Although states do receive some reimbursement from the federal government for those funds, they still end up losing 54 cents for every dollar of the insurance tax, according to The New York Times.
Indiana, Kansas, Louisiana, Nebraska, Texas and Wisconsin brought the federal lawsuit against HHS and the IRS, claiming the ACA contains no language indicating states would be responsible for part of the fee.
"This dispute arises primarily from the March 2015 publication of Actuarial Standard of Practice Number 40, which for the first time notified the several states that, functionally, they were being assessed or taxed the Health Insurance Providers Fee…as part of the Affordable Care Act," wrote the states in the lawsuit.
The federal government is projected to collect between $13 billion and $15 billion from the states for the fee over the next 10 years, according to the lawsuit.
Among the relief requested in the lawsuit is declaration that applying the fee to the states and their Medicaid and Children's Health Insurance managed care organizations is unconstitutional.
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