A group of small business owners has filed suit against President Obama’s health care law, breathing new life into a long-simmering debate on whether the law’s premium tax credits were solely intended for states that set up their own insurance markets.
The plaintiffs span six states and 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 market places, or “exchanges.”
The Competitive Enterprise Institute (CEI), which is coordinating the lawsuit, is following in the footsteps of the state of Oklahoma, which sued last year after the Internal Revenue Service issued a rule last May that would make federally run exchanges eligible for the subsidies.
The U.S. Supreme Court upheld key portions of Mr. Obama’s health care reform last year, but Oklahoma and others say the implementation of the law has been tainted by an administration that decided to issue new rules once they realized that half of the states would not opt to set up a state-run exchange.
“The IRS Rule squarely contravenes the express text of the ACA, ignoring the clear limitations that Congress imposed on the availability of the federal subsidies,” the plaintiffs said in court papers filed Thursday at the U.S. District Court for the District of Columbia.
In effect, the Obama administration says states like Oklahoma 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 in the new lawsuit are individuals and small businesses in states that have opted not to set up exchanges on their own. They are hoping to get further in the courts than Oklahoma, which has faced issues of legal standing in their fight against the Obama administration.
“Thirty-three states have exercised their congressionally-created option to not create an exchange in order to spare their businesses from the employer mandate,” CEI said Thursday. “The IRS rule, however, deprives them of this choice.”
The institute has enlisted the help of attorney Michael Carvin, a partner at the Jones Day law firm who co-argued the “Obamacare” cases before the Supreme Court in June.
Rep. Darrell E. Issa, California Republican and chairman of the House Committee on Oversight and Government Reform, has been battling the IRS to try to get documents related to the administration’s thinking on the issue.