Court sets Kansas damages in ‘Obamacare’ case at $56 million

The federal government must repay Kansas more than $56 million for illegally collecting an Obamacare fee from the state over a three-year period, a federal district court judge in Texas ruled yesterday. Read portions of the press release below:

In 2015, Kansas Attorney General Derek Schmidt and five other states sued the federal government, arguing that the Health Insurance Provider (HIP) Fee — one of the numerous taxes and fees imposed by the Affordable Care Act, or “Obamacare” — was being illegally collected from their state treasuries. Federal statute expressly prohibits the imposition of the HIP fee on states. But in states like Kansas that contract with private managed care organizations (MCOs) to operate their Medicaid programs, the federal government imposed the fee on the MCOs, then adopted a regulation requiring the MCOs to pass the cost of the HIP fee through to the state.

“As we’ve argued from the beginning of this case, the two-step HIP Fee scheme illegally taxes treasuries in states like Kansas to pay for federal expenditures, and the unlawfully collected amounts must be returned to the states,” Schmidt said. “We’ve thought this was illegal, and the court has agreed.”

Federal District Judge Reed O’Connor ruled in March 2018 that the regulation mandating the MCOs pass the cost of the HIP fee through to the states was illegal. In August 2018, the judge ordered the federal government to return to the states the money it had illegally collected.