WASHINGTON — Six different plaintiffs filed a joint lawsuit Thursday in protest of the Affordable Care Act’s employer mandate the U.S. District Court in Washington.
Those filing allege that the Internal Revenue Service issued rules too broad by offering tax credits to assist with health insurance premiums in those states that have opted to not set up their own exchanges.
This, they argue, means the requirement for medium- and large-size businesses to offer insurance should not apply. The mandate requires firms with 50 or more workers to provide affordable insurance or pay a $2,000 penalty per worker save the first 30 employees.
Sam Kazman, general counsel at Competitive Enterprise Institute, argues that the presence of subsidies directly correlates with the employer mandate. Kazman’s group is assisting with the legal work and media coordination in the case.
“Our reading of the statute is that the credits are to be permitted in the participating states,” he said. “However if the credit is applicable, so is the penalty for not offering high enough levels of insurance, which triggers the employer mandate.”
The law offers what the complaint calls “carrots” to encourage states to run their exchanges. The chief reward among those offered were the premium assistance tax credits, Kazman said.
“The IRS Rule squarely contravenes the express text of the ACA,” the court complaint read, “ignoring the clear limitations that Congress imposed on the availability of the federal subsidies. And the IRS promulgated the regulation without any reasoned effort to reconcile it with the contrary provisions of the statute.”
“They define exchange to mean a state exchange. They exclude federal exchange. In our view it’s clearly limited to state exchanges,” he said.The health care law gave directions to government agencies with jurisdiction to set up rules to carry out and enforce the provisions of the Affordable Care Act. But Kazman says the IRS overstepped the authority that the legislative language gave them.
“Frankly, given the level of detail in which Congress was making these credits available, that argument is not going to fly,” he said.
In an interesting twist, several employees, who the measure is meant to assist, are among the plaintiffs. They argue that if employers don’t offer insurance and the workers qualify for a subsidy, they will end up paying more than if they weren’t eligible for the tax credit.
Without a subsidy, these individuals would be exempt from the individual mandate, but with the assistance of a tax credit they are not, forcing them to pay more for health insurance.
The plaintiffs are from Kansas, Missouri, Texas, Virginia, Tennessee and West Virginia, all states that, in their view, operated to not solely run their own exchange.
Michael Carvin, a law partnet at Jones Day, will represent the plaintiffs. Carvin argued in front of the Supreme Court for the high-profile lawsuit against the Affordable Care Act.