TOPEKA, Kan. – Kansas Attorney General Derek Schmidt today filed a federal lawsuit challenging the federal government’s legal authority to require the State of Kansas to pay a tax that finances a portion of the Affordable Care Act, also known as “Obamacare.”
In a news release, Schmidt said Texas, Kansas and Louisiana filed the suit against the U.S. government in federal district court in Wichita Falls, Texas. The U.S. Department of Health and Human Services and the Internal Revenue Service were specifically named in the suit.
The lawsuit seeks a court order that prevents collection of the new Health Insurance Providers Fees assessed against companies that manage state Medicaid or Children’s Health Insurance programs.
The states allege the new fees, which are required by the Affordable Care Act and are legally required to be passed on to the states, constitute a de facto tax on state treasuries. The federal government does not have legal authority to tax the states to raise money for the federal treasury, the states argue.
Schmidt’s office said in the first year of the new tax, Kansas paid the federal government about $32.8 million. The lawsuit seeks a refund of that amount and an order prohibiting future collections of the tax from states or from companies managing state Medicaid or Children’s Health Insurance programs.
“If the federal government wants to tax and spend, it may do so within the confines of the law,” Schmidt said. “But it may not, we think, employ accounting tricks that force the states to do the taxing while the federal government does the spending. Kansas has state priorities for that $32 million that do not include financing the federal government’s operations.”