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Indiana joins suit challenging Obamacare fee

February 24, 2016

Six states filed a new lawsuit Wednesday against the Obama administration over the Affordable Care Act.

The complaint that Texas, Wisconsin, Kansas, Louisiana, Indiana and Nebraska filed in the Northern District of Texas takes issue with the Health Insurance Providers Fee assessed to health insurers to cover federal subsidies.

“We contend it is unconstitutional under intergovernmental tax immunity for the federal government to impose a tax upon a state government, and that’s what this fee does,” Indiana Attorney General Greg Zoeller said in a statement. “States now have no choice but to pay this tax or risk the loss of their essential federal Medicaid funding that underpins patient coverage for our neediest citizens.”

In 2014, the fee cost Indiana $17.4 million, an amount that is expected to increase in the coming years as more enrollees are added to Indiana’s Medicaid programs

The lawsuit says nothing in the Affordable Care Act's language provided clear notice that states would also have to pay the fee.

"This notice was not even provided by rule but was ultimately provided by a private entity wielding legislative authority," the suit says.

The suit seeks an injunction against the federal rules that say states are responsible for the fee. It also asks that states be refunded for what they've already paid.

The federal government has determined states must pay a portion of the fee to their Medicaid managed care organizations to then pay to the federal government. States get some reimbursement from the federal government for that money, but they end up losing 54 cents for every dollar of the insurance tax.

The suit says the fee is projected to allow the federal government to collect between $13 billion and $15 billion from states over the next decade.

The lawsuit does not affect individuals who are enrolled for health insurance through the Affordable Care Act or employers who are required to provide health insurance coverage to employees under the ACA.

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