USA Wants Texas’ Obamacare Suit Dismissed

DALLAS (CN) - The United States on Wednesday fired back at Texas, Kansas and Louisiana, claiming the states have no standing to challenge an Obamacare health insurance provider's fee as an unconstitutional tax.

The three states sued the United States in Wichita Falls Federal Court in October last year. They claim they were notified of the fee in March 2015 and have paid it, but that the "new regulatory framework poses myriad statutory and constitutional" issues.

"The statute and regulations governing the health insurance provider's fee include no specific language excluding the activities of for-profit managed care organizations providing Medicaid or CHIP services from being included in the fee," the complaint stated.

Managed-care organizations provided Medicaid services to 87 percent of Texas' full-benefit population in 2015 and will receive $16.6 billion for health care services - 17 percent of Texas' budget, according to the complaint.

Texas paid $86 million in 2013 and $140 million a year since.

The United States responded Wednesday, filing a 34-page brief in support of its motion to dismiss. It says the plaintiffs lack standing to request a refund under federal law.

"The code expressly permits refund requests by third parties in only limited circumstances, and plaintiffs fit within none of these exceptions," the brief states. "To the extent that third-party challenges are permitted beyond what is expressly listed in the code, the Supreme Court has limited such challenges to persons who paid the tax directly to the IRS. ... Here, the HIPF is assessed against and paid by certain insurers, not the states or any other health insurance customers. Section 1346(a)(1)'s limited waiver of sovereign immunity therefore does not extend to plaintiffs."

The United States says the states failed to state a constitutional claim, that their coercion claims fail because paying the fee is "not a condition on receiving federal Medicaid funds," and the states can avoid the fee's effects.

"The states need not contract with managed-care organizations at all; they are free to use the fee-for-service model that has been part of Medicaid since its inception and continues to be used to varying extents by each of the plaintiff states," the brief states. "And to the extent they choose to use a managed-care model, they can opt to contract with qualifying nonprofits that are exempt from the HIPF or even establish a government-run MCO."

States have "significant leverage" in negotiating capitation rates, can use their bargaining power to minimize rate increases and are "in control of any effect" from the fee, the United States says.

In conclusion, the government says: "This Court cannot adjudicate the merits of this dispute. Plaintiffs lack standing to challenge the HIPF and the actuarial-soundness requirement, and federal statutes make clear this Court is without jurisdiction to award a remedy. Additionally, the States have operated under the 2002 actuarial-soundness requirement for over a decade, so their challenge to 42 U.S.C. § 1396b(m)(2)(A)(iii) and 42 C.F.R. § 438.6(c)(1)(i)(C) is time-barred. But even if the Court reaches the merits, Plaintiffs' arguments amount to nothing more than a complaint that its costs for managed care might increase as a result of the Affordable Care Act. This does not state a cognizable claim for relief. The Court should therefore dismiss the Complaint in its entirety."

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