COLUMBUS, Ohio (CN) - The program used to fund Obamacare improperly taxes states and local governments, a federal class action led by the state of Ohio alleges.
Ohio filed the complaint on Monday alongside Warren County, the Ohio Department of Administrative Services, the University of Akron, Shawnee State University, Bowling Green State University and Youngstown State University.
It says that, by implementing the Patient Protection and Affordable Care Act's "Transitional Reinsurance Program," the federal government has "assessed and now collected mandatory monetary 'contributions' not only from insurance companies and certain private self-insured health care plans, but also directly from state and local governments that provide self-insured health care plans for their employees."
"The federal bureaucracy overreaches and acts beyond its statutory authority in purporting to apply these taxes to plaintiff the State of Ohio and its instrumentalities including the Ohio Department of Administrative Services, plaintiff universities, and Warren County," the complaint continues.
Ohio says there is a reason Congress limited the mandatory contributions to administrators of welfare-benefit plans under the Employee Retirement Income Security Act.
That is because, if applied to state governments, "such taxation would alter radically the balance of authority between the federal government and the states: it would violate important federalism protections of the United States Constitution, including the Tenth Amendment and the related Anti-Commandeering doctrine and the doctrine of Intergovernmental Tax Immunity," the complaint states.
Ohio also accuses Uncle Sam of misusing the funds collected under the "Transitional Reinsurance Program."
"The federal government has acknowledged ... that a significant portion of the monies so collected will not fund 'transitional reinsurance,' but instead will be directed into the general fund of the United States Treasury," the complaint states.
"Thus, not only is the federal government purporting to tax the states and their instrumentalities directly, but it is doing so in part to fund federal programs unrelated to the specified objects of the tax and its central stated purpose," Ohio notes.
A letter Ohio Attorney General Mike DeWine sent to the U.S. Department of Health and Human Services, informing it that the reinsurance tax does not apply to state and local government entities, has allegedly gone unanswered.
"Defendants have responded to that letter only by proceeding to collect the disputed taxes from the state of Ohio and its instrumentalities," the complaint states.
Ohio and the other plaintiffs want all money collected by the U.S. government for the Reinsurance Program, an figure they put at more than $6.3 million, refunded.
They are represented by Frederick Nelson, senior adviser to Ohio Attorney General Mike DeWine.
The United States of America is names as a defendant, as are the Department of Health and Human Services and its secretary, Sylvia Mathews Burwell.
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