It’s about to get worse. The federal judiciary is currently hearing four cases challenging decisions made by the Internal Revenue Service that could soon deliver more major blows to the Affordable Care Act.
One such decision extended subsidies provided by Obamacare for lower-income individuals and families (those making up to four times the povery level) to people in the 36 states served by the federally-operated exchange, HealthCare.gov.
But the law spells out clearly that such federal subsidies will be granted “through an exchange established by the state” – not that they can be granted by the federal government.
Fair enough. But why would anyone sue to prevent the federal government from giving them money?
Surprisingly, some folks will actually face higher healthcare expenses if they take the federal government’s cash.
The first lawsuit – Halbig vs. Sebelius – shows how. One of the plaintiffs, David Klemencic, a West Virginia man who does flooring work, argues that under the Affordable Care Act, he is exempt from the individual mandate because of his low income.
But if the federally operated exchange is authorized to hand out subsidies in his state, he’ll no longer be eligible for the exemption. He’ll either have to buy an insurance plan on the exchange or pay the fine for refusing to comply with the mandate.
In both instances, his wallet would be lighter than if he were allowed to simply go without insurance.
Klemencic isn’t alone. Two other lawsuits that turn on the same issue – that is, whether the federal government is legally authorized to distribute subsidies in the 36 state exchanges they operate – are wending their way through courts in Richmond, Va., and Oklahoma.
There’s a fourth legal challenge facing the IRS in Indiana, where the state and 15 public school districts are disputing a ruling from the agency that would extend the employer mandate to state and local governments.
Indiana Attorney General Greg Zoeller argues that the penalties for failing to comply with the employer mandate – which have been justified by the U.S. Supreme Court as “taxes” – should not apply to his state because the federal government doesn’t have the authority to levy taxes on state governments.
The Indiana school districts claim that they’ll have to reduce working hours or lay off workers in order to shoulder the increased costs – or financial penalties – the employer mandate would impose upon them.
These school staffers won’t be the only ones harmed by the IRS’s interpretation of the law. Students will suffer, too, as their teachers will be forced to put in fewer hours.
The decisions in these four cases will only be binding in the jurisdictions where they’re brought. But as the American Enterprise Institute’s Thomas P. Miller notes, court rulings against the IRS rules and the federal subsidies could create a ripple effect, encouraging other states without state-based exchanges to file similar cases.
The Justice Department claims that not issuing subsidies in states with federal-run exchanges would defeat the purpose of the law and run contrary to what Congress intended.
But there’s no better indication of congressional intent than what the law actually says. And as folks in Virginia, Oklahoma, Indiana and around the country are discovering, the administration’s preference for implementing Obamacare as it wishes is leading to real harm.
If the courts strike down the IRS rulings, Obamacare will be on its way to busting first in the 36 states served by HealthCare.gov – and then in the rest of the country.