Small Business Owners Sue to Stop IRS’s ObamaCare Power Grab


Earlier this week, we covered a lawsuit filed by Matt Sissel, an Iraq War veteran who is challenging the constitutionality of the Affordable Care Act — or ObamaCare, as it has come to be known. Sissel contends that because the law, which raises taxes on businesses and individuals, didn’t originate in the House as constitutionally required, it should be struck down.

Sissel’s case, however, isn’t the only challenge to ObamaCare currently working its way through the court system. A group of small business owners from states that have declined to setup insurance exchanges filed a lawsuit yesterday that seeks to prevent the Internal Revenue Service (IRS) from imposing fines against them:

The individual plaintiffs in the new lawsuit, from Tennessee, Texas, Virginia and West Virginia – states that didn’t set up exchanges — say they should not be considered eligible for the subsidies and should not have to pay a fine if they don’t purchase insurance.

The “subsidies actually serve to financially injure and restrict the economic choices of certain individuals,” the new complaint says. “For these people, the Subsidy Expansion Rule, by making insurance less ‘unaffordable,’ subjects them to the individual mandate’s requirement to purchase costly, comprehensive health insurance that they otherwise would forgo.”

The employers from Missouri, Kansas and Texas are arguing that they should not be subject to penalties that they may have to pay if their workers receive tax subsidies through the exchanges

This is a pretty significant court challenge. Under ObamaCare, employers are required to offer health insurance coverage or face a $2,000 per employee fine that will ostensibly subsidize employees healthcare through a state exchange. But because last year’s Supreme Court’s decision made the exchanges and Medicare expansion optional, the fines on businesses in states that declined to setup the exchanges should not be imposed.

The Competitive Enterprise Institute, which is providing assistance and some funding for the case, sent out a press release yesterday offering more details about the employers and their grievances:

Michael Carvin, partner at Jones Day, who co-argued the Supreme Court Obamacare cases in March, 2012 and who represents the plaintiffs in this lawsuit, stated: “The IRS rule we are challenging is at war with the Act’s plain language and completely rewrites the deal that Congress made with the states on running these insurance exchanges.”

“Agencies are bound by the laws enacted by Congress,” said Sam Kazman, general counsel of the Competitive Enterprise Institute (CEI).  “Obamacare is already an incredibly massive program.  For the IRS to expand it even more, without congressional authorization and in a manner aimed at undercutting state choice, is flagrantly illegal.”  CEI is coordinating the lawsuit.
“Contrary to the clear language in the Affordable Care act, government is directly impeding my ability to design a quality affordable health plan for my employees,” said Chuck Willey, M.D., one of the plaintiffs and head of Innovare Health Advocates in St. Louis, Missouri.  “The IRS will extra-legislatively extend this onerous benefit requirement (which will increase premiums and costs of care) and impose the employer penalty in states with federally-run exchanges. I maintain the right to choose my own employees’ health plan without government intervention into its benefit design and without penalty.”

Unfortunately, the IRS contends that because the federal government is stepping in to create its own exchange, the fines still apply. More than 30 states have declined to create their own exchanges. The fines businesses in those states face from the IRS for not complying with the illegal regulations could be as much as $1.3 billion.

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