Analysis Law and Policy

The New Front in the Legal Fight Over Obamacare

Jessica Mason Pieklo

A lawsuit filed by the State of Indiana shows conservatives' evolving legal strategy in trying to undermine health-care reform.

Click here for all our coverage of the health insurance exchange rollout as part of the Affordable Care Act.

It’s been well over a year since the Supreme Court declared much of the Affordable Care Act constitutional, but that’s hardly stopped conservatives from trying to litigate health-care reform to death. In addition to the now over 70 federal lawsuits challenging the law’s birth control benefit, conservative attorneys general in red states that refused to set up their own health insurance exchanges are targeting the power of the federal government to operate exchanges on their behalf. It’s the latest iteration of a multi-faceted strategy with one goal in mind: to make Obamacare so politically unpopular the law sinks from the weight of its own opposition. If you listen to conservatives, they’ll tell you this is a winning strategy. The evidence, however, suggests otherwise.

The latest lawsuit targeting health-care reform comes from Indiana, where last week attorneys for the state filed a federal lawsuit arguing a new IRS regulation governing the employer mandate in Obamacare is unconstitutional. The IRS poses hefty fines on employers that don’t offer health insurance coverage and whose employees use federal premium subsidies to buy coverage through any public insurance exchange. Under the IRS rules, if employers do not offer health insurance coverage to at least 95 percent of its full-time employees and even one employee uses a federal premium subsidy to buy coverage in either a federal or a state exchange, the employer is liable for a $2,000 penalty for each full-time employee, minus the first 30 employees. The penalty is slated to take effect in 2015.

The lawsuit, filed by Indiana Attorney General Greg Zoeller and 15 Indiana public school districts, claims the Affordable Care Act employer mandate is unconstitutional because Congress never gave the IRS authority to impose penalties for not complying with the individual or employer mandates in states that did not create their own health insurance exchanges and that the financial penalties for not complying with the employer mandate cannot be applied to government employers, like public schools.

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Indiana’s lawsuit follows a similar suit filed by Oklahoma’s attorney general this summer. Oklahoma’s lawsuit, which was originally filed in January 2011 but remained pending until a resolution of the lawsuit challenging the individual mandate was made, cleared its first legal hurdle this summer when a federal district court refused to grant the Obama administration’s motion to dismiss the lawsuit.

The motion, brought at the initial stage of the lawsuit, challenged Oklahoma’s standing to sue and not the merits of the claims, a point mostly overlooked by conservatives who heralded the August ruling as more proof the law would ultimately fail. And like the other conservative legal challenges to health-care reform, the legal claims sound sophisticated, but in reality they are more smoke-and-mirrors.

According to the states challenging the employer mandate and IRS rule, unless insurance subsidies are administered by exchanges created by the states, the subsidies are forbidden by the ACA. Therefore, states that have not set up their own exchanges, including Indiana and Oklahoma, effectively cut their residents out of affordable health insurance. That’s because, the red states argue, if the federal government comes in and sets up an exchange after a recalcitrant state refuses to, those exchanges can’t offer subsidies to make coverage affordable because the law only explicitly empowers state-run exchanges, and not the IRS, to offer those subsidies. The result is apparent: It create no means of affordable coverage in most of the red states for those who need it most. And thanks to the Roberts Court ruling that the individual mandate is constitutional, people who struggle to get coverage but are not so poor as to meet the exemption would be stuck with a penalty and no health-care coverage, increasing support for a repeal of the law.

But, that hasn’t quite happened. In August, while the federal court refused to dismiss Oklahoma’s claims outright, it hardly gave an enthusiastic support of the merits of the claims either, noting that at the beginning of a lawsuit, plaintiffs are entitled to very “lenient” standards in coming up with viable legal claims.

More importantly, though, the August order, while allowing the lawsuit to proceed, largely dismisses the main theoretical premise of Oklahoma’s lawsuit and the suit advanced by Indiana—the premise being that the states, vis-a-vis the Tenth Amendment, have legal interests to pursue claims against the federal government on behalf of their constituents. The law calls this idea parens patriae, which roughly translates to the state “acting on behalf of” someone unable to act in their own interests. It’s a theory that shows up in some juvenile proceedings, for example, where the state steps into a “parental role,” so to speak, to assert rights and legal challenges on behalf of someone who is, for whatever reason, unable to assert them on their own. But courts have long rejected the idea that states can pursue such claims, because they typically don’t contain an actual injury—a loss of rights or an injury to a person or property sufficient to justify legal action. It’s a fundamental procedural concept—before anyone can sue, even the state, they have to have something legitimate to sue about. The Supreme Court made this clear in 1923, when it said “the naked contention that Congress has usurped the reserved powers of the several States by the mere enactment of a statute” is not enough to establish a state’s standing to challenge the law and sue the federal government.

Enter, then, the newest wave of conservative legal ideologues. Like the evolution of corporate religious exercise claims to challenge the contraception benefit, this latest iteration of the power of the states under the Tenth Amendment would have been widely dismissed a decade ago. But that was before conservatives made it their mission to defeat Obamacare at any cost. Now, with the federal government shutdown dragging into its second week and conservatives refusing to back away from demands that if the entire health-care law doesn’t go then at least the contraception benefit must, it’s clear that these lawsuits are simply a part of their war on the poor and their political crusade to make health-care reform too costly for the Obama administration to maintain. And while so far polling suggests this is a strategic misfire for the Republicans, that hardly matters for the tens of thousands who have been blocked by their own states from most of the benefits of health-care reform and now face the end of federal benefits as those same conservatives hold their lives hostage in the shutdown games.

Naturally, that’s now how conservatives see it. “This case is about the fundamental relationship between the State and federal government,” Indiana Attorney General Zoeller said in a statement announcing the lawsuit. “We contend the ACA improperly regulates sovereign states and does not authorize the IRS to do what it is doing in treating the State as a taxable entity. We are raising this respectful challenge for the federal courts to decide these questions.”

Zoeller’s statement is disingenuous at best. The legal theory, advanced by both Indiana and Oklahoma in their challenges to the employer mandate, was first cooked up by legal scholars at the libertarian Cato Institute, the same scholars that concocted the original legal challenge to Obamacare. These are not “respectful” challenges as much as they are political challenges disguised as legal arguments, and it’s time for the courts to recognize them as such.

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