There have been a multitude of lawsuits against Obamacare, including several candidates for acceptance by the U.S. Supreme Court, that charge the government cannot force individuals and companies to violate religious rights.
But a judge this week allowed a case to move forward on a much simpler and potentially more threatening concept: that the administration blew off part of the law it wrote in order to threaten more people and more companies with penalties.
The case was brought months ago by the Competitive Enterprise Institute on behalf of a couple dozen individuals and companies. It alleges that the law’s wording exempts the plaintiffs from most of Obamacare’s requirements because they are in states that opted out of setting up their own exchanges.
The original complaint points out that the White House offered a carrot to the states to convince them to set up insurance exchanges – “refundable tax credits to help a state’s low- and moderate-income residents buy insurance.”
The offer was accompanied by a threat: If the state refused to set up an exchange, the federal government would do it for them. But the state’s exchange would receive “no subsidies at all.”
According to the lawsuit, that would leave many of the states’ residents exempt from Obamacare, because the costs would be higher than 8 percent of their income. Many employers also would be exempt, the suit argues, because the mandate is triggered only by subsidies for employees.
The administration, however, simply changed the provision in Obamacare through an Internal Revenue Service “rule” that makes the subsidies available. The rule triggers the mandates for both employees and employers in the states where officials refused to set up state exchanges.
The result of the arbitrary change, according to the lawsuit, is that both individuals and employers now are being harmed.
“The IRS rule’s unauthorized subsidies would trigger these mandates and payments against plaintiffs, who are individuals and businesses residing in states that have opted not to establish exchanges,” the complaint explains. “The rule would block the individual plaintiffs from satisfying the unaffordability exemption, thereby forcing them to purchase comprehensive, costly insurance that they do not want. And the rule would expose the business plaintiffs to payments under the employer mandate, thereby requiring them to offer comprehensive, ACA-compliant insurance that they do not want to sponsor.
“Under the text of the act, premium-assistance subsidies are not available in the … states with federally established exchanges,” the complaint states. “But the IRS has promulgated a rule requiring the Treasury to disburse subsidies in those states regardless.”
The IRS argued that the change in the law could be made arbitrarily.
“The relevant legislative history does not demonstrate that Congress intended to limit the premium tax credit to state exchanges,” the IRS noted. “Accordingly, the final regulations maintain the rule in the proposed regulations because it is consistent with the language, purpose, and structure of [the law.]”
That’s despite the law’s specific statement that subsidies are offered to individuals for plans “within a state which cover the taxpayer, the taxpayer’s spouse, or any dependent … of the taxpayer and which were enrolled in through an exchange established by the state.
“The IRS’s reading is contrary to the act’s plain language,” the complaint argues. “The ACA unambiguously restricts premium-assistance subsidies to state-established insurance exchange.
“By authorizing federal premium-assistance subsidies to individuals who do not qualify under the statute, the IRS rule exceeds the agency’s statutory authority and is arbitrary, capricious, and contrary to law.”
The bad news for the Obama administration is that its attempt this week to have the case dismissed failed.
U.S. District Judge Paul Friedman said he would put the controversy on an expedited schedule with a decision coming before Feb. 15.
“We have been hoping for a quick ruling since we filed this case, and now it looks like we will get it,” Sam Kazman, general counsel for the Competitive Enterprise Institute, said after the ruling.
“We are hopeful the forthcoming ruling will invalidate the attempt by the IRS to eliminate the distinction between states that participate in the insurance exchange program and those that do not.”
The issue is coming to a head just as the Obamacare registration campaign has been hit with major technical failures blocking most consumers from accessing the information they’ll need. Millions of people may be logging on to the Obamacare signup websites – the various state and federal sites – but a small number have been able to complete the process.
The viability of the federal health care program is dependent on huge numbers of people signing up for the policies and paying for them.
The threat, then, to Obamacare from the case is that should the court determine the IRS rule is an improper change to standing federal law, millions, or tens of millions of people in two-thirds of the states could be exempt from Obamacare’s requirements.
And local companies there also would be exempt from the $2,000 per employee penalties.
“Under the act, businesses in these nonparticipating states should be free of the employer mandate, and the scope of the individual mandate should be reduced as well,” the plaintiffs said.
The case has been littered with arguments by the government in defense of the abrupt change in the law by the IRS rule. The government over recent weeks filed a motion to dismiss, then argued for that action, then opposed a request for a preliminary injunction.
A commentary at the Washington Times described the case as an opportunity to “kick the props out from under Obamacare.”
“Without the federal subsidies, enforcement of the individual mandate would be all but impossible. Low- and moderate-income Americans in 34 states would be required to buy costly Obamacare-approved insurance policies which, without the subsidies, they couldn’t afford.”
The result undoubtedly will upset the White House, the newspaper said, because the White House “is not accustomed to argument when it blows off deadlines, and amends, postpones or rescinds numerous other provisions of a law it doesn’t like.”
“The plain language … of Obamacare requires that federal insurance subsidies go only to those ‘enrolled … through an exchange established by the state.’ The president wants to encourage people to sign up, so he ignores the law and sends the subsidies to federal exchange participants anyway.”
Forbes reported earlier on the case: “In more than half the country, the implementation of Obamacare has been premised on a patently illegal regulation – a lawless ‘quick fix’ designed by the administration to circumvent the fact that roughly two-thirds of the states have effectively chosen to ‘opt out.”‘
The IRS rule, Forbes said, “rewrites the terms of the offer that Congress extended and overrides the decision made by the 33 states that declined to create exchanges, exposing businesses in those states to penalties that would otherwise not apply and vastly expanding in those states the scope of the individual mandate. It would also, of source, lawlessly spend money from the federal treasury in circumstances where Congress – the guardian of the federal purse – has plainly not authorized such expenditures.”