2016 News Releases

AG Schmidt: Kansas leads 13-state coalition against unlawful tax on states

Release Date: Apr 11, 2016

TOPEKA – (April 11, 2016) – Kansas is leading a coalition of 13 states urging rejection of the federal government’s effort to tax states to pay for expensive healthcare reforms mandated under the Affordable Care Act, Kansas Attorney General Derek Schmidt announced today.

Kansas and the other states today filed a brief with the U.S. Court of Appeals for the 6th Circuit in Cincinnati asking the Court to reject an Obama-administration effort to impose a “transitional reinsurance” tax on state governmental health plans.

“By forcing state governments to absorb the financial burden of implementing a federal regulatory program, the federal government can take credit for ‘solving’ problems without having to pay for the solutions with higher federal taxes,” Schmidt said. “If the transitional reinsurance tax is imposed in this manner, then the states will then be required to tax their citizens to pay for federal expenses despite the states’ longstanding sovereign immunity from federal taxes. If the federal government can commandeer state treasuries this way, this certainly will not be the last time it will do so.”

To offset the cost of the unprecedented and expensive federal reforms during three transitional years (calendar years 2015-2017; benefit years 2014-2016), the ACA included a “transitional reinsurance program” designed to raise $25 billion over the three year period by taxing certain health insurance issuers and group health plans for each enrollee in benefit years 2014-2016. Of that amount, $20 billion goes to “individual market” insurance companies that may incur large claims during the transition to ACA health insurance mandates and exchanges. The other $5 billion goes to the Treasury’s “general fund” as the federal government’s cut of the tax. The Obama administration has attempted to apply this tax to state governmental health plans like that of Kansas.

Kansas has paid – under protest – nearly $4.5 million for benefit year 2014 and more than $2.3 million in the first installment for 2015. Kansas’s second installment for 2015, more than $770,000, is due in November 2016. Under the current law Kansas and other States will face another payment in January 2017.

The case in which Kansas filed its amicus brief this week is State of Ohio, et al., v. United States of America, et al., in the U.S. Court of Appeals for the 6th Circuit, Case No. 16-3093. Kansas is supporting the plaintiff, the State of Ohio.

States joining the Kansas-led brief are: Arizona, Indiana, Louisiana, Montana, Nevada, Oklahoma, South Carolina, South Dakota, Utah, West Virginia, Wisconsin, and Wyoming. A copy of the brief is available at http://1.usa.gov/1S5Tq5L .

In addition to leading the multi-state effort in Ohio, Kansas is a plaintiff in a Texas-led lawsuit directly challenging the federal government’s legal authority to assess a Health Insurance Providers Fee against the states in a similar manner. That case, which was filed last October and is pending in federal district court in Texas, is State of Texas, et al. v. United States of America, et al., in the U.S. District Court for the Northern District of Texas, Case No. 15-cv-151-O.

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News releases issued prior to 2011 are available through an archive hosted by the Kansas State Library.