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Judge: Oklahoma can pursue case against Obamacare tax credits

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A federal judge says the state of Oklahoma can pursue a lawsuit against the Obama administration that claims the federal government is unlawfully extending tax credits to states that opted not to set up their own insurance exchanges under the new health care law.

U.S. District Court Judge Ronald A. White did not weigh in on the case's merits but has allowed it to proceed after examining whether the state had legal standing to continue its action in court. He rejected some of the state's arguments Monday, but accepted others, such as the state's claim it could be adversely affected by the administration's interpretation of the law because it is a large employer.

Oklahoma Attorney General E. Scott Pruitt, who testified about the issue before House investigators on Capitol Hill last month, is among critics who say the Obama administration is flouting the letter of its own signature law.

The Affordable Care Act says government subsidies intended to help people buy health insurance should go to exchanges "established by the State."

The exchanges, where Americans without employer-based insurance will buy coverage through premium tax credits, will start to enroll consumers in all 50 states and the District of Columbia on Oct. 1 for health coverage that takes effect in January.

Mr. Pruitt wants the court to issue an injunction that prevents the government from doling out tax credits to exchanges set up by the federal government. His lawsuit also seeks a court ruling that declares invalid the Internal Revenue Service rule that cleared the way for subsidies to be offered on the federally run exchanges.

A coalition of small-business owners in states that deferred to a federal exchange also have sued the administration in federal court, saying their states had the right to reject the subsidies.

For their part, administration officials say they've interpreted the law appropriately, and that Congress would never have intended to treat some states differently than others.

But critics say the Obama administration did not expect states to reject the opportunity to run the exchanges themselves, only to see more than half of them hand off the responsibility to the federal government.

Rep. Darrell E. Issa, California Republican and the chairman of the House Committee on Oversight and Government Reform, has said the administration is "stonewalling" his attempts to figure out why the Treasury Department interpreted the law in the way it did. He threatened July 31 to subpoena emails that detail the Treasury's thinking before it issued its regulations.

Critics, such as Mr. Pruitt, also say the extension of subsidies to federally run exchanges exposes their states to the employer mandate, which requires companies of 50 or more full-time workers to provide adequate health coverage of pay fines. The fines kick in when at least one employee takes advantage of subsides on the exchange.

The White House announced July 2 it planned to delay the employer mandate by one year, to 2015.

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