Obamacare in Federal Court on Monday Over Illegitimate IRS Penalties

WASHINGTON, Oct. 18 –  A federal judge will hear motions Monday on a lawsuit that challenges how the IRS will enforce the Affordable Care Act.

The hearing in Halbig v. Sebelius is to consider a preliminary injunction being sought on behalf of one of the plaintiffs, David Klemensic, who runs a retail flooring business in West Virginia, and a motion by the government to dismiss the case.

Plaintiffs in the lawsuit, in which Competitive Enterprise Institute attorneys are assisting, include a group of individuals and small business owners in six states who have sued over an IRS regulation imposed under the Affordable Care Act (ACA) that will subject them to a series of penalties and force them to cut back employees’ hours, even though they are located in states that have refused to set up their own insurance exchanges.  The complaint and preliminary injunction filings can be viewed at cei.org/halbig-v-sebelius.

The ACA authorizes health insurance subsidies to qualifying individuals in states that created their own healthcare exchanges. These subsidies trigger the employer mandate – a $2,000-per-employee penalty – and expose more people to the individual mandate. But without authorization from Congress, the IRS vastly expanded those subsidies to cover the 34 “refusenik” states that have decided not to set up such exchanges. The ACA plainly says businesses in these nonparticipating states should be free of the employer mandate, and the scope of the individual mandate should be reduced as well. The IRS rule expands both mandates and deprives states of the power given to them by Congress to exempt their residents and businesses from these requirements.

“The Obamacare statute is vast enough as it is,” said Sam Kazman, general counsel for CEI. “The IRS has no right to expand that statute even to encompass states that have chosen to opt out of the insurance exchange program.”

Mike Carvin, a partner at Jones Day who co-argued NFIB v. Sebelius at the U.S. Supreme Court in 2012, will argue on behalf of plaintiffs in Halbig v. Sebelius this Monday.