Kansas sues federal government over health insurance provider fee

Kansas and two other states sued the federal government Thursday over a health insurance provider fee that affects the companies managing the state’s Medicaid services.

Kansas is seeking a $32.8 million refund from the federal government. The lawsuit seeks to halt the collection of fees from insurance companies that manage the states’ Medicaid and Children’s Health Insurance programs. The policy to collect the fees is part of the Affordable Care Act, also known as Obamacare.

States must reimburse the private insurance companies for the cost of that fee. The state privatized its Medicaid services under the KanCare umbrella during Gov. Sam Brownback’s first term in office.

The lawsuit, which was filed with Texas and Louisiana as co-plaintiffs, argues that nothing “in the language of the Affordable Care Act provides clear notice to the States that a condition of the federal funding for their Medicaid and CHIP managed care organizations was paying the Health Insurance Providers Fee.”

Attorney General Derek Schmidt called the policy a tax in a news release Thursday afternoon.

“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.”

This story was originally published October 22, 2015 at 3:39 PM with the headline "Kansas sues federal government over health insurance provider fee."