The Badger State has been burned for more than $23 million in fee payments after the Obama administration sold the states a bad bill of goods, according to the lawsuit.
Indiana, Kansas, Louisiana, Nebraska, and Texas also have signed on to the federal lawsuit, which seeks declaratory and injunctive relief against the United States, the U.S. Department of Health and Human Services, as well as DHHS Secretary Silvia Burwell and Internal Revenue Commissioner John Koskinen.
“The Plaintiff States also seek monetary relief against the United States in the form of a return of the Health Insurance Providers Fees previously made,” the lawsuit states.
Wisconsin Attorney General Brad Schimel noted the fee originally was to be imposed upon healthcare-insurance providers. The purpose was to generate revenue from a windfall that the Democrat-controlled Congress anticipated insurers to receive through increasing enrollment in Obamacare.
“Instead, the Obama Administration has determined that the States themselves are liable for these fees,” Schimel said in a statement issued Wednesday afternoon. “These fees are substantial.”
In 2014 and 2015, for instance, Wisconsin spent more than $23 million in Health Insurance Provider Fees, according to the lawsuit.
In the next decade, the Health Insurance Providers Fee is projected to allow the federal government to collect between $13 and $15 billion from the states, according to an analysis by Milliman, Inc.
“By functionally requiring that the Plaintiff States reimburse managed care organizations for payment of tax liabilities, the United States has imposed those taxes on the States,” the lawsuit states.
The plaintiffs learned they would be on the hook in a March 2015 publication of Actuarial Standard of Practice No. 49 from the Actuarial Standards Board – a private organization (not part of the federal government) that establishes and improves standards of actuarial practice.
“Plaintiff States have now paid the fee and herein contend that this new regulatory framework poses myriad statutory and constitutional problems,” the lawsuit states.
On December 18, 2015, Congress enacted, and Obama signed into law, a temporary, one-year moratorium on the Health Insurance Providers Fee for 2017. In the meantime, and after 2017, states will continue to bear the cost of the fee, the lawsuit notes.
“Nothing in the language of the Affordable Care Act provides clear notice to the States that a condition of the federal funding for their Medicaid and CHIP (Children’s Health Insurance Program) managed care organizations was paying the Health Insurance Providers Fee and associated costs to the managed care organizations to pay to the federal government,” the lawsuit states. “(T)his notice was not even provided by rule but was ultimately provided by a private entity wielding legislative authority.”
Approximately 1 in 5 Wisconsin residents, or about 1.19 million people, are on Medicaid, according to the lawsuit. As of November 2015, the state had approximately 54,627 children enrolled in CHIP. About 25 percent of Wisconsin’s 2015-17 budget is devoted to Medicaid costs.
The rules governing the fee allow that nonprofit managed care organizations that receive more than 80 percent of their gross revenue from government programs serving low income, elderly, and disabled populations are exempt from the fee. Nonprofit managed care organizations not qualifying may deduct 50 percent of their premium from the fee calculation.
Wisconsin and the other states in the lawsuit use for-profit managed care organizations to provide their low-income and child-based health insurance benefits. They are being punished for that, the lawsuit contends.
“Contracting with nonprofit managed care organizations that are exempt from the fee is often impossible because of the relative scarcity of such nonprofit organizations, and because not all that do exist apply to become managed care organizations with the Plaintiff States,” the filing documents states.
Scott Manley, senior vice president of government relations for Wisconsin Manufacturers & Commerce, said Wisconsin taxpayers are “paying a steep price” for the Obama administration’s “misguided and unlawful federal policy.”
“This is another unfortunate example of Obamacare making healthcare more expensive for families,” Manley said.
The lawsuit ultimately contends that the federal government is coercing the states to cough up the Health Insurance Providers Fee.
“By placing in jeopardy a substantial percentage of the Plaintiff States’ budgets if the Plaintiff States refuse to help pay the costs of the United States’ preferred policy, the United States has left the Plaintiff States no real choice but to acquiesce in such policy,” the suit states.