This week, Indiana Attorney General Greg Zoeller filed a lawsuit against the Internal Revenue Service (IRS) challenging its authority to fund Obamacare’s insurance subsidies for individuals and enacting penalties against public employers (such as state and local governments) that don’t meet the health law’s minimum worker coverage requirement. If successful, the challenge would prevent Americans from receiving the government assistance that makes Obamacare’s insurance marketplace plans affordable in the first place.
Zoeller claims that the health law doesn’t permit people living in the 36 states that have refused to set up their own Obamacare marketplaces — including Indiana — to qualify for federal insurance subsidies. He also says that local government employers which don’t meet Obamacare’s requirements cannot be penalized under the law to help fund those subsidies.
The argument is based on a technical ambiguity in the law that state-level GOP officials and congressional Republicans have previously seized on in an attempt to undermine the ACA’s consumer assistance. The IRS has issued regulations saying that the law permits and intends the agency to extend subsidies to Americans in all 50 states.
“The fact that many citizens lack health insurance is an issue for policymakers, and my office takes no position regarding the congressional debate over funding the ACA. I never complain when private plaintiffs file lawsuits to challenge the state authority that my office defends; but now our role is reversed and Indiana has initiated this lawsuit asking the court whether the IRS has exceeded its federal taxing authority over state governments,” said Zoeller in a statement. “This respectful challenge is an appropriate role for the Office of the Attorney General to vigorously assert the ability of the State and its political subdivisions to manage their workforces in our American system of federalism.”
Zoeller argues that Congress would have to pass separate legislation in order for Americans to qualify for tax credits in the states that haven’t set up an Obamacare marketplace.
If the lawsuit is successful, it would amount to a massive premium hike for Americans who are required to procure insurance coverage under the health law — and could fundamentally cripple Obamacare’s goal of extending affordable health coverage to the uninsured. The Congressional Budget Office (CBO) estimates that over 85 percent of individuals who sign up through the marketplaces this year will qualify for subsidies to help them afford their new plans. Those subsidies can end up reducing the top-line cost of health coverage by as much as the full premium amount, depending on an individual’s yearly income.
Oklahoma has filed a similar lawsuit against the federal government. Several GOP-led states have taken alternative tactics to undermine reform, such as refusing to implement the law’s basic consumer protections like its ban on insurers denying coverage to Americans with pre-existing medical conditions. And many red states are successfully denying coverage to poor Americans by refusing to expand Medicaid under the health law.