With time running out before state-based insurance markets begin enrolling applicants under President Obama’s health care law, a group of small businesses wants a court to expedite its claim that the federal government cannot offer premium tax credits on the exchanges the government will set up in more than 30 states.
Business owners from six states are seeking an expedited judgment in their favor in a lawsuit they filed last month in the U.S. District Court for the District of Columbia. They claim the government subsidies designed to help individuals buy health plans as of 2014 should not, under the strict language of the Affordable Care Act, be offered in states that decided to let the federal government set up their respective marketplaces, or “exchanges.”
“The federal government is not a ‘state.’ The subsidies are therefore not available for coverage purchased through federally established marketplaces,” the plaintiffs’ attorneys say in a motion filed Thursday that seeks summary judgment in their favor.
The Competitive Enterprise Institute (CEI), which is coordinating the lawsuit, is following the lead of Oklahoma, which sued last year after the Internal Revenue Service issued a rule in May 2012 that would make federally run exchanges eligible for the subsidies.
The Obama administration, through the Treasury Department, says it is implementing the law appropriately while states work to reach benchmarks. In the Oklahoma case, it has argued the state does not have standing or jurisdiction to bring its lawsuit.
Plaintiffs in the CEI complaint are individuals and small businesses in states that have opted not to set up exchanges on their own.
In effect, the Obama administration says these states will be subject to the “employer play-or-pay mandate” that imposes penalties on companies with more than 50 full-time employees that fail to provide adequate medical insurance coverage.
Because the penalties apply when at least one full-time employee is in line for a premium tax credit to purchase insurance, states that opted for a federally run exchange say the rule no longer will allow them to be insulated from the fines.
The plaintiffs say quick action is needed because the IRS rule on mandates takes effect Jan. 1.
The Supreme Court upheld key portions of Mr. Obama’s health care reform last year, but critics say implementation of the law has been tainted by an administration that decided to issue new rules once it realized that half of the states would not opt to set up a state-run exchange.
Seventeen states opted to run health care exchanges themselves, but 27 asked the federal government to do it for them and seven will partner with the feds.
In its motion, the plaintiffs claim the government thought it would compel the states to set up their own markets by offering federal subsidies to people who search for plans on the exchanges.
“As it turns out, that offer was not enough to persuade all of the states to accept this new responsibility with 34 states opting out, the IRS apparently determined that the act’s limit on subsidies was bad policy,” the CEI plaintiffs say in their new filing.