Can Government Tax Other Governments? ACA Challenge in Ohio


“To put this simply, governments don’t tax other governments,” said DeWine. “This illegal taxation is another example of federal overreach the administration’s refusal to operate within the boundaries of federalism.”

Ohio, Warren Co. sue feds over Obamacare fee

 Rachel Richardson,

LEBANON – Warren County could be the next front in the battle against a key part of the Affordable Care Act, state and local officials say.

Ohio Attorney General Mike DeWine joined Warren County officials Monday in announcing a lawsuit filed in U.S. District Court against President Barack Obama’s administration for what they say is an unconstitutional tax on state and local governments.

“To put this simply, governments don’t tax other governments,” said DeWine. “This illegal taxation is another example of federal overreach the administration’s refusal to operate within the boundaries of federalism.”

Officials say the lawsuit, also joined by the Ohio Department of Administrative Services and four state universities, is not an attempt to strike down the Affordable Care Act, or Obamacare.

The suit challenges the Transitional Reinsurance Program, a part of the ACA that assesses fees on health insurance companies and certain employers – including state and local governments – who offer self-insured group health plans.

The federal government says the “tax,” which the Obama administration calls a “fee,” is intended as a reinsurance fund for 2014, 2015 and 2016 to help hold down the cost of health insurance premiums while acting as a safety net for insurers as the new insurance reforms take effect.

Those fees – $63 per covered person in the first year — fund a state reinsurance pool, a kind of insurance policy for health insurers selling individual policies under the ACA if they underestimate the cost of premiums for new high-risk clients that result in financial losses.

The federal government allowed employers to pay the 2014 fee in two installments. Warren County, one of the state’s fastest-growing counties, made its first payment of about $94,000 earlier this month and will pay $113,904 total when it makes its second installment this year.

County officials said the payment was made both to provide grounds to file the lawsuit and because a failure to pay could have resulted in fines of $100 a day for each employee enrolled in the county’s health plan, which comes out to about $180,000 a day, said Warren County Commissioner Dave Young.

DeWine, an opponent of Obamacare, and GOP officials from Warren County argue that the assessed amount – $5.3 million for the state and nearly $114,000 for Warren County – is an issue of “taxation without representation.”

“We are writing a check from our taxpayer dollars that goes for this program,” said Young. “That is a tax upon a tax. We don’t do government that way in this country. That’s dangerous territory.”

The lawsuit – joined by the Ohio Department of Administrative Services, the University of Akron, Shawnee State University, Youngstown State University and Bowling Green State University – alleges the fee amounts to a tax that violates the 10th Amendment of the U.S. Constitution, which defines the balance of power between the federal and state governments, along with other federal doctrines.

Moreover, officials say, the language in the ACA does not specify state or local governments as being among employers to which the fee applies.

The lead attorneys in the lawsuit are DeWine, Warren County Prosecutor David Fornshell and Kyle Duncan, a Washington, D.C., attorney who represented Hobby Lobby Stores in its challenge to the ACA last year.

The landmark U.S. Supreme Court ruling said that closely held corporations could not be forced to insure contraceptives that conflicted with their owners’ religious beliefs.

Members of the Warren County Democratic Party attended Monday’s announcement at the Warren County Administration building to protest what they say is an attempt by Republican state and local officials to score “political points” in attacking the ACA.

“We believe their intent is to distract the public from the real benefits the ACA has provided and undermine public support for this important program,” party leaders said in a written statement. “How much will Warren County spend to fight this unnecessary legal battle?”

Young admits that the $113,904 fee doesn’t pose significant harm to Warren County, which has an annual budget of $65 million.

He said the larger issue centers on what he calls an “unprecedented power grab” by the Obama administration to unfairly “tax” state and local governments.

“We’re not trying to overhaul the Affordable Care Act. That’s not my role,” said Young. “It is my role to protect taxpayer dollars of Warren County. Whether you’re Republican or Democrat, the tax dollars you collect from your local constituents is very sacred.”

DeWine says it’s difficult to tally the exact cost of the fee to Ohio taxpayers, but said “hundreds” of government entities across the state operate similar health insurance plans and are subject to the fee.

“This is a ton of money at stake,” he said.

Officials say they expect other local municipalities and state organizations to join the lawsuit as co-plaintiffs.

“Over the past week, I’ve received countless phone calls from other counties,” said Fornshell. “If we are successful in this lawsuit, the efforts will extend well beyond our county’s borders.”