Bench Memos

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New Lawsuit Against Obamacare


Sam Kazman and Michael Carvin have a great Forbes op-ed about their new Obamacare lawsuit, which could invalidate key portions of the law in the 33 states that did not set-up state-based health-insurance exchanges. Essentially, the lawsuit alleges that the IRS illegally rewrote the Affordable Care Act so that both the employer mandate and accompanying government subsidies applied in the 33 states that lack their own health-insurance exchanges:

In more than half the country, the implementation of ObamaCare has been premised on a patently illegal regulation—a lawless “quick fix” designed by the Administration to circumvent the fact that roughly two-thirds of the states have effectively chosen to “opt out” of the Affordable Care Act’s intrusive mandates. A new lawsuit, recently filed by us in federal district court in D.C., will expose that flaw in ObamaCare’s very foundation, vindicating the right of these “refusenik” states to shield their citizens from an overreaching federal government. Specifically, although the Act’s plain language makes clear that a State’s citizens may receive subsidies and a State’s employers are required to offer health insurance if—but only if—the State decides to run the Act’s insurance “Exchange,” a new IRS rule completely rewrites this scheme and purports to make the subsidies and employer mandate applicable even where the State has opted out and the federal government runs the “Exchange.”

A little background will help clarify what is at stake. One of the linchpins of the Act is the establishment of new, State-operated insurance “Exchanges”— a type of virtual marketplace where insurers could sell standardized health insurance products on the individual market, under the watchful eye of regulators. These Exchanges are the vehicle for distribution of the federal “premium assistance” subsidies that were intended to make comprehensive insurance affordable for millions of Americans. And those subsidies, in turn, are supposed to encourage businesses to sponsor affordable health coverage for their employees, because the Act penalizes employers if any of their employees receives a federal subsidy after buying an individual policy on an Exchange. Without these Exchanges and accompanying subsidies, millions of individuals would be effectively exempt from the law’s “individual mandate,” because insurance would be too expensive for them to buy; and businesses would not be subject to the “employer mandate” to sponsor employee coverage. Those are two of the Act’s central pillars

Plaintiffs in this lawsuit include small businesses and individuals in six states. The employer mandate would make it unaffordable for one business to hire some full-time employees, while another business objects to Obamacare’s strait-jacket approach to mandating insurance coverage, which prevents the business from providing consumer-driven health insurance.

You can read the complaint here.


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