- Last year, six states including Texas, Wisconsin, Kansas, Louisiana, Indiana and Nebraska filed a lawsuit arguing that a provision within the Affordable Care Act requiring states to cover a Health Insurance Provider Fee is unconstitutional and defies federal law.
The Texas Tribune reported that the Health Insurance Provider Fee cost the state of Texas $86 million in 2013, which led Attorney General Ken Paxton to join the other states in filing the lawsuit against this Affordable Care Act provision. Additionally, the fee has cost Texas $120 million every year since 2013 since subsequent years had a larger rate for the Health Insurance Provider Fee. This fee reimburses companies that are using public funds within state Medicaid managed care organizations.
“This threat to cut Medicaid funding to Texans unless the state continues to pay hundreds of millions in taxes to Washington amounts to the very ‘gun to the head’ the Supreme Court warned about in earlier rulings on Obamacare,” Paxton said in a public statement.
Paxton has called the ACA provision unconstitutional arguing that Texas should not have to pay this fee to the federal government. State attorneys general who have filed this lawsuit are hoping for the Health Insurance Provider Fee to be ruled unconstitutional and asking to be repaid for the money already paid to the federal government over the last several years.
Stacey Pogue, a policy analyst for the Center for Public Policy Priorities, told the news source that state Medicaid premiums have always been part of the “cost of doing business” and that state officials have never found it problematic before.
Health Affairs reported that, last week, Judge Reed O’Connor of the Northern District of Texas allowed the lawsuit to proceed and did not dismiss its claims. The lawsuit claims that it is unconstitutional for the federal government to require states to cover the costs of the Health Insurance Provider Fee paid by Medicaid and CHIP managed care organizations in order for the states to receive federal Medicaid funding.
The Health Insurance Provider Fee is meant to help finance several aspects of healthcare coverage via the Affordable Care Act. This fee is meant to help collect $8 billion in 2014 and as much as $14.3 billion in 2018.
This fee applies to for-profit and privatized managed care organizations while not requiring nonprofit managed care systems to pay this particular bill. The lawsuit asks the federal government to repay all funds that have already been paid by the states. The federal government has asked to have all claims dismissed.
However, Judge O’Connor has denied the government’s motion to dismiss this court case. O’Connor clarified that the states had a concrete claim against the government’s actions regarding the Affordable Care Act provision.
One area in which O’Connor did dismiss part of the claims is that of a tax refund. Since the states did not actually pay the tax and the managed care organizations took on this cost, the states were not eligible for a tax refund.
When it comes to denying the government’s dismissal of the case, the court stated that it is legitimate to consider the requirement mandating states to reimburse managed care organizations for the Health Insurance Provider Fee as “unconstitutionally coercive.”
“The court next held that that the plaintiffs stated a cause of action under the Tenth Amendment and the Intergovernmental Tax Immunity doctrine which prohibit the federal government from imposing taxes directly on the states. The HIPF is imposed on MCOs, not directly on the states, and substantial authority cited by the judge holds that the federal government is not barred from imposing a tax on a private entity just because the tax is passed on to a state. Judge O’Connor held, however, that because of the actuarial standard the tax could be seen as imposed directly on the state in violation of the Tax Immunity Doctrine and Tenth Amendment,” Health Affairs reported.
“The court then turned to the actuarial standard itself. The plaintiffs claimed that the federal government had improperly delegated legislative power to the ASB, a private entity. The nondelegation doctrine has been moribund for decades. In fact, governments at all levels routinely rely on standards created by private standard-setting bodies, including actuarial standards. Indeed Texas law relies on the standards of the ASB as authoritative. Relying on a concurring opinion by Justice Alito in a recent Supreme Court case decided on other grounds, in which Alito was joined by no other justice, Judge O’Connor held that the delegation claim could not be dismissed.”
“Finally, Judge O’Connor held that the plaintiffs had properly stated a claim that the delegation of standard setting authority to the actuarial standards board violated the Administrative Procedures Act requirement of notice and comment rulemaking and that the government’s action was sufficiently arbitrary and capricious as to be subject to challenge whether or not the court showed deference to the Department of Health and Human Services (HHS).”
O’Connor reached similar conclusions to the US Supreme Court ruling when the justices determined that Medicaid expansion is a new healthcare program and states could not be mandated to participate with the potential risk of losing their existing Medicaid funding if state officials refused. Judge O’Connor declared that requiring the reimbursement of the Health Insurance Provider Fee is similar to the case brought before the Supreme Court four years ago.
While these type of court cases may change aspects of the Affordable Care Act for years to come, it is unlikely to have a major affect on the landmark healthcare law in terms of ensuring greater healthcare coverage across the country.