A federal judge has set oral arguments for Oct. 9 in a case that could strip Hoosiers of their ability to get federal subsidies for health insurance.
Southern District Judge William T. Lawrence ruled late Tuesday that Indiana and 39 school districts can largely move forward with a case challenging the Affordable Care Act and associated rules set by the Internal Revenue Service.
The IRS had asked Lawrence to dismiss the case.
The case questions whether Hoosiers should qualify for federal tax breaks that are being used as subsidies to help Americans afford insurance. At issue are the health exchanges – essentially online marketplaces – where citizens who don’t have insurance through their workplaces can shop for coverage.
The suit says the Affordable Care Act – known as Obamacare – only authorized the tax breaks for people who purchase insurance through state-based exchanges, which Indiana doesn’t have. But the Internal Revenue Service has since expanded the rules for federal subsidies so they are available to all qualified Americans who purchase insurance through an exchange, whether it’s run through the state or federal government, the suit says.
Also, the suit questions whether federal officials can impose an employer health insurance mandate and a tax penalty on state and local governments, which don’t pay taxes.
Lawrence ruled that the state could move forward with its argument about the subsidies. And it said the school districts could make arguments about the tax issues during a later phase of the case – but that the state could not.
“We are pleased the state and 39 school districts will have our day in court to explain why the IRS greatly overstepped its bounds,” Attorney General Greg Zoeller said in a statement. “Ultimately our aim is for the court to remove the threat of multimillion-dollar IRS penalties against the state of Indiana and its school corporations that government as employers otherwise could face.”
If the state wins the argument that the IRS had no authority to expand the subsidies to states without their own exchanges, Hoosiers could have to pay significantly more for health insurance. But it could save businesses and governments money.
That’s because the Obamacare law requires companies to pay penalties if they fail to provide minimum health coverage to employees – and at least one of those employees signs up through an exchange and receives the federal subsidy.
Under the law as written, no Indiana company could be subject to the penalty because the state doesn’t have an exchange and therefore employees couldn’t qualify for a subsidy, according to the lawsuit.
Federal appeals courts have handed down conflicting rulings on the question about whether the IRS could authorize the subsidies.
A three-judge panel of the D.C. Circuit Court of Appeals said no, ruling that the Affordable Care Act limits the subsidies only to residents of places with state-run exchanges.
But the 4th District Court of Appeals found the opposite. In its ruling, that court said the language of the federal law is “ambiguous and subject to multiple interpretations” that would allow for the subsidies.
Lesley Weidenbener is the executive director of TheStatehouseFile.com, a news service powered by Franklin College journalism students and faculty.