IRS Sued for Extending ObamaCare Subsidies to Ineligible Individuals

By:  Michael Tennant
IRS Sued for Extending ObamaCare Subsidies to Ineligible Individuals

A group of individuals and small businesses is suing the IRS for ruling that individuals in states that do not establish insurance exchanges are eligible for premium subsidies in direct contravention of the ObamaCare law.

ObamaCare is once more being taken to court. Unlike previous lawsuits, which challenged the Affordable Care Act (ACA) itself, this suit, coordinated by the Competitive Enterprise Institute (CEI), contests the Internal Revenue Service’s (IRS) interpretation of a key provision of the law — an interpretation the plaintiffs say unfairly subjects more individuals and employers to the ACA’s mandates.

“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,” said Michael Carvin, partner at Jones Day, who is representing the plaintiffs in the lawsuit. (Carvin previously co-argued the ObamaCare cases before the Supreme Court.)

That “deal,” the lawsuit explains, was this: Congress gave each state the option of establishing its own insurance exchange or letting the federal government do it. Residents of states that chose to create exchanges would then be eligible for federal subsidies for the purchase of insurance on those exchanges. Residents of states that went the federal route, on the other hand, would not be eligible for such subsidies.

The law is quite clear on this point, according to the complaint:

The ACA unambiguously restricts premium-assistance subsidies to state-established insurance exchanges. The plain text of the statute makes subsidies available only to individuals who enroll in insurance plans “through an Exchange established by the State under [section] 1311 of the [Act].”... But an exchange established by the federal government under the authority of [section] 1321 of the Act is not “an Exchange established by the State under [section] 1311 of the [Act].”

Twenty-six states have opted not to involve themselves in their exchanges at all, preferring to let the federal government shoulder the entire burden. Another seven are leaving Washington in charge of their exchanges but assisting with their operation. For the purpose of determining subsidy eligibility, these “partnership” exchanges are considered federal, not state, exchanges. Thus, in 33 states, individuals are not eligible for federal subsidies under the ACA.

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Photo: AP Images

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