Suit challenges taxes on Medicaid benefits

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Two firms that provide mental-health services to Florida Medicaid beneficiaries have filed a lawsuit challenging the state’s attempt to collect millions of dollars in back insurance taxes, reports Jim Saunders of the News Service of Florida.

Florida Health Partners, Inc., and North Florida Behavioral Health Partners, Inc., filed the lawsuit last week in Leon County circuit court, after the state Department of Revenue notified them in October that they owed more than $6.6 million in taxes and interest from 2007 through 2010.

The firms, which are related, contend that collecting insurance-premium taxes on the government-funded Medicaid benefits is unconstitutional. Also, they argue that the state Agency for Health Care Administration did not include enough money in their Medicaid rates to cover the taxes.

The lawsuit comes more than six months after lawmakers approved a bill that exempts such firms from having to pay insurance-premium taxes in the future. But the bill does not shield them from back taxes.

The legislative debate stemmed, at least in part, from a 2007 lawsuit that found AHCA’s payments to mental-health contractors were subject to the insurance-premium tax, according to House and Senate analyses. Those contractors operate as “prepaid limited health service organizations,” a form of managed care.

Such organizations receive set amounts of money to provide services to Medicaid beneficiaries. Florida Health Partners operates in the central and southwest parts of the state, while North Florida Behavioral Health Partners serves a large swath of north-central Florida.

Court documents show that the companies this month sent checks to the Department of Revenue for a combined $6.68 million in taxes and interest. But a Nov. 16 letter from ValueOptions Inc., a Virginia-based company that is a partner in the Florida firms, made clear they would fight to get the money back.

“We do not agree with the (tax) assessments; payments are being made under protest, and we reserve our right to challenge the assessment and request a refund,” said the letter, signed by Paul Rosenberg, executive vice president and general counsel of ValueOptions.

With AHCA signing contracts and making payments to Medicaid providers, the lawsuit argues that imposing the insurance-premium tax is unconstitutional. It describes AHCA as the “de facto payer of any premium tax,” violating the state’s immunity from taxation.

But even if the tax is valid, the lawsuit contends that AHCA did not include enough money in the providers’ rates from 2007 through 2010 to cover the taxes.

Separate from the tax case, Florida Health Partners also is embroiled in a legal fight with AHCA about whether the firm spent enough money on services to Medicaid beneficiaries in 2006.

That case, which was filed in September in the state Division of Administrative Hearings, centers on a requirement that mental-health providers spend 80 percent of the money they receive on patient services — a requirement known as a “medical loss ratio.”

AHCA contends that Florida Health Partners did not meet that requirement and should pay back money to the state. An administrative law judge has scheduled a hearing in February.

Peter Schorsch is the President of Extensive Enterprises and is the publisher of some of Florida’s most influential new media websites, including,,, and Sunburn, the morning read of what’s hot in Florida politics. SaintPetersBlog has for three years running been ranked by the Washington Post as the best state-based blog in Florida. In addition to his publishing efforts, Peter is a political consultant to several of the state’s largest governmental affairs and public relations firms. Peter lives in St. Petersburg with his wife, Michelle, and their daughter, Ella.