Tuesday, December 3, 2013
Opponents of the Affordable Care Act, or Obamacare, have set off a new wave of challenges to the Act, according to today's NYT. Among these: the religious challenges to the contraception mandate; cases challenging President Obama's extension of the employer mandate deadline; and challenges to the IRS rule providing a subsidy to purchasers of health insurance on the federal exchange.
As to that last one: plaintiffs in a spate of cases argue that Section 1401(a) of the ACA provides that purchasers of health insurance on a state exchange, but not the federal exchange, get a federal subsidy; yet the IRS issued a rule that extends the federal subsidy (in the form of a tax credit) to purchasers on the federal exchange. This, they say, violates the Administrative Procedures Act and the Tenth Amendment.
Why the Tenth Amendment? Opponents say that under the ACA an employer who declines to extend coverage has to pay a penalty if and when the federal government gives the employer's employees a subsidy for purchasing health insurance on a state exchange. Opponents say that the IRS rule extends this federal subsidy, and also the employer penalty, when the employer's employees purchase health insurance on the federal exchange. According to opponents, that undermines the state's policy decision not to open a state exchange in the first place. Or, as Indiana put it in paragraph 10 of its complaint in State of Indiana v. IRS:
[The IRS rule] contravenes the text of the ACA, thwarts Indiana's ability to execute State policy sparing employers from Employer Mandate penalties, induces Plaintiffs to reduce the hours of certain employees, including part-time and intermittent employees, to avoid having to provide all such employees with minimum essential coverage, and requires Plaintiffs to file onerous reports with the IRS detailing insurance coverage decisions. It thereby violates both the Administrative Procedure Act and the Tenth Amendment, and the Court should permanently enjoin Defendants from putting it into effect.
Later, in paragraph 17, it says:
In light of the IRS Rule, the State will be forced to reduce the hours of several part-time or intermittent employees in order to avoid the "assessable payment" or employer penalty of the ACA.
According to the Notice of Final Rulemaking, the IRS considered and rejected claims that the ACA itself limits subsidies to purchasers on state exchanges when it took comments on the proposed rule. The IRS said:
The statutory language of section 36B and other provisions of the Affordable Care Act support the interpretation that credits are available to taxpayers who obtain coverage through a State Exchange, regional Exchange, subsidiary Exchange, and the Federally-facilitated Exchange. Moreover, the relevant legislative history does not demonstrate that Congress intended to limit the premium tax credit to State Exchanges.