By Jon Cassidy | Watchdog.org
HOUSTON — One year ago Friday, the U.S. Supreme Court upheld the Affordable Care Act, but its ruling established a legal fact — Obamacare’s penalties are a form of taxation — that may yet doom the law.
Houston doctor Steven F. Hotze filed a lawsuit last month arguing that since the penalties are taxes, the law violates the Origination Clause of the Constitution, which requires tax bills to originate in the U.S. House of Representatives. Neither side in last year’s landmark case addressed the issue, so the court didn’t either.
Hotze’s lawsuit is just one of at least four viable cases seeking to reverse or limit Obamacare, with the law due to take effect in less than 100 days.
When the state health exchanges open on Oct. 1 — strike that. If the state health exchanges open on Oct. 1 (a new report from the Government Accountability Office found that so many deadlines had been missed that it “cannot yet be determined” if the federal government will manage a “timely and smooth implementation of the exchanges by October.”), the estimated 27.1 percent of Texans who are uninsured will be obligated to buy health insurance or sign up for Medicaid if they’re eligible.
A March study by the Society of Actuaries estimated that individual health premiums would increase by 26.9 percent in Texas, from $249 a month to $316.
The study also predicted that the uninsured rate would decline to 14.9 percent, even though Texas is refusing to expand Medicaid eligibility under the Affordable Care Act.
Texas’ Medicaid costs still are expected to increase by $1.8 billion in state money and $3.3 billion in federal matching money, as people who already are eligible finally enroll to avoid Obamacare’s penalties, according to the Center for Public Policy Priorities.
Across the state and around the country, employers are cutting the hours of some workers and hiring more temps as a way around Obamacare’s health insurance mandate for anyone working 30 hours a week or more.
An informal survey by the Federal Reserve Bank in Minneapolis, which tilted heavily toward professional services and other salaried fields, found that even there, 11 percent of employers were cutting hours or planned to do so. (The Huffington Post attempted to present this as evidence that employers nationwide are not cutting hours.)
Yet there are dozens of companies on the record planning to cut hours, and the jobs tend to be in retail, or services like restaurants and movie theaters, or low-level government work, and even nonprofits.
There are the well-known cases of Papa John’s and Wendy’s, and others that have avoided commenting on their plans after seeing the backlash against businesses that did. One hears squeaks from employees of Dunkin Donuts or McDonald’s, on Twitter, say, but no confirmation of any new hour-limiting policies.
In Texas, local governments are trying to avoid millions of dollars in increased costs.
The Dallas County Community College District, for example, is cutting the hours for all of its 2500 adjunct professors to under 30 per week.
“The Affordable Care Act has added so much complexity and administrative burden that there is nothing affordable about it,” Jared Pope, a business consultant who has given presentations on the law at Texas Municipal League conferences, told the Dallas Morning News.
Pillar Hotels and Resorts, based in Texas, is “is focusing on hiring part-time workers among its 5,500 employees,” according to the Atlanta Business Chronicle.
A Gallup poll in February found that part-time workers are now 20.6 percent of the workforce, up 1.5 points from three years prior.
The Los Angeles Times reported that “an estimated 2.3 million workers nationwide, including 240,000 in California, are at risk of losing hours as employers adjust to the new math of workplace benefits, according to research by UC Berkeley.”
There are still opportunities to limit the damage caused by this “huge train wreck,” as Democratic U.S. Sen. Max Baucus of Montana famously called it.
Catholics and other Christians who object to providing employees with morning-after pills, which they consider abortifacients, got good news Thursday, when the 10th Circuit Court of Appeals granted an injunction to Hobby Lobby and a sister company while their case is considered.
“Hobby Lobby and Mardel have drawn a line at providing coverage for drugs or devices they consider to induce abortions, and it is not for us to question whether the line is reasonable,” the panel wrote. “The question here is not whether the reasonable observer would consider the plaintiffs complicit in an immoral act, but rather how the plaintiffs themselves measure their degree of complicity.”
Two other federal plaintiffs are arguing that Obamacare penalties should be largely null in the states that have refused to set up health care exchanges, and that the IRS has illegally established a tax unapproved by Congress in those states.
One was filed by Oklahoma Attorney General Scott Pruitt and the other by a group of individuals and small businesses (Halbig v. Sebelius). Both argue that the requirement that businesses with 50-plus employees provide government-approved health plans depends on the existence of a state-run health exchange.
As Watchdog.org reported last fall, no state-run exchange equals no employer mandate. That’s according to a strict reading of the Affordable Care Act, which the IRS has given a much more liberal interpretation.
“The Act’s ‘employer mandate’ taxes employers up to $3,000 per employee if they fail to offer required health benefits. But that tax applies only if employers receive tax credits or subsidies to purchase a health plan through a state-run insurance exchange,” Maurice Thompson, director of the 1851 Center for Constitutional Law, said then.
If the federal government sets up the exchange, the employer mandate won’t apply, according to this interpretation.
As of May 28, only 16 states and the District of Columbia had agreed to set up exchanges. Another seven plan to administer some portion of a federal exchange.
However, the Affordable Care Act doesn’t specifically authorize the federal government to offer tax credits or subsidies through its own exchanges. Rather, it continually refers to “an Exchange established by the State.”
The reason that matters, according to Michael Cannon of the Cato Institute and Jonathan Adler, a professor at Case Western Reserve University School of Law, is that the “tax credits and subsidies for the purchase of qualifying health insurance plans in state-run Exchanges serve as more than just an inducement to states. These entitlements also operate as the trigger for enforcement of the Act’s ‘employer mandate.’”
Without that state-based trigger, there’s no tax penalty, according to a strict reading of the law. That’s not just their opinion. The Congressional Research Service wrote that a “strictly textual analysis of the plain meaning of the provision would likely lead to the conclusion that the IRS’s authority to issue the premium tax credits is limited only to situations in which the taxpayer is enrolled in a state-established exchange. Therefore, an IRS interpretation that extended tax credits to those enrolled in federally facilitated exchanges would be contrary to clear congressional intent … and likely be deemed invalid.”
That “likely… invalid” interpretation is exactly the one the IRS settled on when it issued a rule in May 2012 treating federal exchanges the same as state exchanges.
In defending the rule, the IRS couldn’t point to any section of law that established tax credits for federal exchanges. Instead the agency argued that its “interpretation” was “consistent with the language” in the law, and that Obamacare’s “legislative history does not demonstrate that Congress intended to limit the premium tax credit to State Exchanges.”
“The IRS rule is illegal,” Cannon and Adler wrote. “It is not authorized by the text of the (Affordable Care Act), nor can it be justified on other grounds.”
The IRS rule amounts to a new tax that wasn’t authorized by Congress, they wrote.
Oklahoma is arguing that the tax “has no basis in any law of the United States; and directly conflicts with the unambiguous language of the very provision of the Internal Revenue Code it purports to interpret.”
Contact Jon Cassidy at [email protected] or @jpcassidy000.