Six states have filed a lawsuit in federal court seeking to strike down regulations that 
require states to cover the costs of the Health Insurance Providers Fee imposed on their Medicaid providers by the Affordable Care Act.
The fee on for-profit insurance companies and managed care organizations averages about $60 per year per insured individual. It is intended to help cover the cost of expanding coverage under the ACA.
Texas is the lead plaintiff, joined by Indiana, Kansas, Louisiana, Nebraska and Wisconsin. The complaint was filed in the U.S. District Court for the Northern District of Texas.
The lawsuit challenges federal rules that require states to reimburse managed care organization and insurance companies for the fees related to a providers’ Medicaid activities. The effect of the rule is that the cost of this portion of the fee is borne by the states, not the companies.
The complaint argues that nothing in the ACA gave the states clear notice that they would have to pay the fee.
“This notice was not even provided by rule but was ultimately provided by a private entity wielding legislative authority,” according to the lawsuit.
The states are asking the federal court to issue an injunction against the rule, and to order a refund of the money the states have already paid.
The federal government does cover some of the cost to the states, but the litigants say they still pay about 54 cents of each dollar of the insurance tax.
Wisconsin’s attorney general said the cost of the fees to that state alone was more than $23 million in 2014 and 2015.