Indiana, school districts file lawsuit over Obamacare

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Reuters reported yesterday that the state of Indiana and several (mostly) southwestern school districts filed suit against the federal government over the Affordable Care Act. The aim of the lawsuit appears twofold; to exclude the state from the health care reform law’s large employer requirement to offer affordable insurance coverage, and subsequently prevent the dispersal of subsidies for Indiana residents seeking coverage on the federally-run non-group insurance exchange. This legal action joins at least three other suits along the same lines.

Part of this lawsuit is a point of contention that was raised by some Cato folks in June of 2012, who claimed that because Section 1311 of the ACA refers to individual-exchanges “established by the state” (i.e., missing the word ‘federal), subsidies (detailed in Section 1401) can only be provided in those states that created marketplaces. In other words, they charge that the way the interlocking language is framed in the legislation means that federal exchanges can’t technically offer premium credits to people who purchase insurance under the law in a state that doesn’t run it’s own marketplace. For more details on this you can read Sarah Kliff’s coverage from last year. These and other lawsuits have gone under the radar since the Supreme Court (mostly) upheld the law last year, so I’m not sure where they are in the legal pipeline. From what little was written about this, the assumption seems to be that courts would accede to, specifically, the legislative intent of the ACA and further regulatory clarifications produced by the Treasury Department.

The most succinct explanation of why this legal argument has no standing comes from Judith Solomon, who concluded:

In providing for a federal exchange, Congress clearly intended that it substitute for a state exchange.  One of the primary functions of an exchange is to determine eligibility for, and the amount of, advance premium tax credits so that people can afford to buy coverage.  The language of section 1321 of the ACA establishing the federal exchange is clear on that point, as is the reference in section 36B of the Internal Revenue Code to credits being provided through a federally operated exchange.  But even if the statute were ambiguous, a court examining whether the Treasury regulations are valid would certainly defer to the agency’s interpretation of the statute because it is both permissible and reasonable.

For a longer dive into this issue, read the always-excellent Tim Jost over at Health Affairs. Among other things, he raised the point that that lawsuits challenging the way premiums are dispursed under the law would probably be subject to the Tax Anti-Injunction Act — meaning that the courts wouldn’t address a case along these lines until 2015 at the earliest.

If that portion of the suit is the detailed legal argument for why the employer mandate and subsidies violate the ACA, the rest is an well-established exercise in appealing to the 10th Amendment.

From the Indianapolis Star:

[…] Zoeller said the case is about the fundamental relationship between the state and federal government defined in the 10th Amendment. He contends the employer mandate to provide health insurance violates the Constitution by setting up a “compulsory regulatory scheme in which sovereign discretion is removed, in derogation of the core constitutional principle of federalism upon which this nation was founded,” according to the lawsuit.

The suit seeks an injunction that would prevent the IRS from financially penalizing Indiana and the school districts.

So among other things, the state of Indiana is claiming that the employer mandate violates state sovereignty by taxing state and local governments (as large employers) for not complying with the law.

To the non-legal question, though, this can be reduced to a (mostly non-partial) basic framing. The most common anecdotal effects from the ACA’s employer mandate have come from two common sources; large employers in the service sector that depend on part-time low-wage workers, and state and local governments that also employ part-time workers with little to no benefits. In both cases faced with a decision to, in many situations, expand insurance coverage to those working more than 30 hours a week or cut hours and avoid the tax penalty under the law, they’re choosing the latter. That’s unfortunate, but it’s ultimately their decision under the current framework of the law. That other employers are making alternative choices that expand coverage is the anecdotal counter to the idea that these entities have ‘no choice’ — they do.

Yet these lawsuits seem like an attempt to take this ability to deny worker’s health insurance one step further; prevent them from gaining coverage both through the workplace and the new insurance marketplaces.This isn’t to construe an explictly cruel motivation on the part of these institutions, but rather that they are seeking special protection from the consequences of their actions. In a world where they are not penalized, that is, without an employer mandate, these lawsuits probably wouldn’t exist. That they cannot fully and completely escape the impact of not providing insurance — as opposed to mostly avoiding the effects of their decision — is one explanation for this attempt to uniquely exclude themselves from the law. The other is an appeal to state’s rights. One seems highly and practically relevant, while the other resembles an excuse masquerading as a principled objection.

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