Six States Win Refund of Obamacare Fees

WICHITA FALLS, Texas (CN) – A federal judge in Texas ordered the government Tuesday evening to pay back six states nearly $840 million in questionable Obamacare fees on state Medicaid programs.

U.S. District Judge Reed O’Connor concluded plaintiffs Texas, Indiana, Kansas, Louisiana, Wisconsin and Nebraska are entitled to disgorgement “as a means of enforcing” the Affordable Care Act’s statutory mandate exempting states from paying the health insurance provider fee, abbreviated as HIPF in court documents.

“The court finds that the [Administrative Procedure Act] and the ACA entitle plaintiffs to disgorgement because the APA waives immunity for ‘a suit seeking to enforce [a] statutory mandate,’ and disgorgement in this case enforces defendant’s compliance with the ACA’s mandate specifically exempting the states from paying the HIPF,” Judge O’Connor wrote in a 17-page ruling.

Led by Texas, the states sued in 2015, claiming the ACA gave no clear notice to states that the fees would be required to continue federal funding for their Medicaid and Child Health Insurance Program, or CHIP. They say that when they found out about the fee, notice was given by a “private entity wielding legislative authority.”

Judge O’Connor explained that the disgorgement would “ordinarily constitute ‘substitute’ relief” that is barred by sovereign immunity because the specific fees cannot be traced, and the states can only ask for the return of the “monetary equivalent” that does not qualify as “specific” relief required for an immunity waiver under the APA.

The judge also declined the states’ motion to reconsider his earlier finding five months ago that the HIPF is not a “tax” but is a “fee” under the ACA and Declaratory Judgment Act.

Texas Attorney General Ken Paxton lauded the ruling late Tuesday. He said Texas will receive over $304.7 million, Indiana $94.8 million, Kansas $142.1 million, Louisiana $172.4 million, Wisconsin $88.9 million and Nebraska $36.2 million, for a total of $839.3 million.

“We all know that the feds cannot tax the states, and we’re proud to return this illegally collected money to the people of Texas,” Paxton said.

Texas and 19 other Republican-led states filed a separate lawsuit in February against the United States, seeking to kill Obamacare for good. In that case, Texas argues the ACA’s individual mandate would be an unconstitutional exercise of federal power under U.S. Supreme Court precedent without the tax penalty that Congress removed during tax cuts last year.

California and 15 other Democratic-led states filed to intervene in the case in April, arguing Congress merely reduces the tax penalty from 2.5 percent to zero and did not repeal any statutory provision of the law itself.

The Trump administration announced in June it would not defend Obamacare in that lawsuit. Leading health care and physicians groups filed an amicus brief in the case days later, claiming the Republican-led states lack standing and ACA’s death would “wreak havoc” on the U.S. health care system.

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