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Illegal Obamacare Fees Trigger $839M Reimbursement to Several States

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The Internal Revenue Service must repay more than $839 million to six states because of an Obama-era Health and Human Services Department requirement, a federal court ruled.

The U.S. District Court for the Northern Division of Texas said the requirement unlawfully imposed a costly fee on state Medicaid programs.

In October 2015, Texas Attorney General Ken Paxton led a multistate lawsuit against the federal government over the Obama-era regulation that “threatened to choke off Medicaid funds for the health needs of millions of Texas citizens unless Texas taxpayers paid a portion of the Health Insurance Providers Fee to help fund Obamacare.”

The states of Indiana, Kansas, Louisiana, Nebraska and Wisconsin joined Texas in suing the federal government, HHS and its acting secretary, Alex Azar, the IRS and its acting commissioner, David Kautter, alleging that they violated the Affordable Care Act by requiring that state governments pay a Health Insurance Providers Fee.

Notwithstanding Congress’s exemption of the states in the ACA, HHS enacted a regulation (the ‘Certification Rule’) that empowered a private actuarial board to require Plaintiffs to account for the HIPF in payments to their respective managed care organizations (‘MCOs’)– the medical providers who contract with Plaintiffs to service their Medicaid recipients,” the plaintiffs argued. “Plaintiffs’ amended complaint challenged the legality and constitutionality of both the HIPF and the Certification Rule.”

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Plaintiffs requested 13 types of relief and financial recompense.

After a series of rulings and hearings, denied requests and appeals, the plaintiffs asked the court to reconsider four aspects of the case, including whether the HIPF was considered a tax or a fee. This week, the court ruled in favor of the states, in part, by ordering the IRS to repay the HIPF money it collected.

“Obamacare is unconstitutional, plain and simple,” Attorney General Paxton, who led the coalition, said. “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.”

Texas stands to be repaid $304,730,608.

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The IRS was ordered to repay Indiana $94,801,483, Kansas $142,121,776, Louisiana $172,493,095, Wisconsin $88,938,850 and Nebraska $36,238,918.

“Obamacare has always been an economic house of cards, and this ruling has again exposed it for what it is: a money laundering scheme,” Louisiana Attorney General Jeff Landry said. “This is a prime example of the deep administrative state doing something that Congress expressly forbids.”

Even though the ACA forbids imposing the HIPF, Landry said “the federal government found a way to do it anyway. The government threat to disapprove our managed care plans risked the loss of those Medicaid funds.”

The ruling protects the state from having to paying any such fees in the future, Landry said. Once the IRS returns the money to Louisiana, Gov. John Bel Edwards “should return any net dollars directly to the hard-working Louisianans who were forced to pay these costs,” he added.

Texas and Wisconsin will argue at a hearing on Sept. 5 that Obamacare, as amended by the recent tax bill, is unconstitutional in its entirety.

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A version of this article appeared on Watchdog.org.

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The Center Square was launched in May 2019 to fulfill the need for high-quality statehouse and statewide news across the United States.

The focus of our work is state- and local-level government and economic reporting. A taxpayer sensibility distinguishes our work from other coverage of state and local issues. As a result of this approach, our readers are better informed about the focus of state and local government and its cost to the citizens whose tax dollars fund governmental decisions.

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