Second Obamacare Lawsuit Gets Green Light In Court | Eastern North Carolina Now

    Publisher's note: The author of this post is AUTHOR NAME, who AUTHOR ROLE for the Carolina Journal, John Hood Publisher.

    D.C. district judge says he plans to rule by Feb. 15

    RALEIGH  -  For the second time in recent weeks, a federal judge has issued a ruling favorable to plaintiffs seeking to block the IRS from collecting tax penalties from employers in states such as North Carolina that do not have a state health insurance exchange under Obamacare. If any of several lawsuits arguing against the IRS rule prevails, it would cripple implementation of the national health reform.

    Judge Paul Friedman for the D.C. federal district denied the government's motion to dismiss the suit, "which means the case is a still-alive case and goes forward" on an expedited schedule for final resolution, said Sam Kazman, general counsel of the Washington, D.C.-based Competitive Enterprise Institute, which is coordinating the case.

    CEI in early May filed the lawsuit now known as Halbig et al. v. Sebelius et al. The plaintiffs are individuals from Tennessee, Texas, Virginia, and West Virginia, a medical practice in Missouri, a restaurant group in Texas, and a community bank in Kansas.

    None of those states has a state-run health insurance exchange.

    The suit says Congress wrote the Patient Protection and Affordable Care Act, as Obamacare is formally known, with carrots for states that run their own exchanges  -  start-up grants and premium-assistance subsidies in the form of tax credit refunds to reduce insurance purchase costs for low- and moderate-income individuals.

    Congress intended those carrots to be matched with sticks  -  no start-up grants, no subsidies, and a federally operated exchange  -  for those states that did not set up their own exchanges, according to the plaintiffs' suit.

    "Notwithstanding express statutory language limiting premium-assistance subsidies to exchanges established by states, the Internal Revenue Service (IRS) has promulgated a regulation ... purporting to authorize subsidies even in states with only federally established exchanges," the suit states.

    That "squarely contravenes the express text of the ACA, ignoring the clear limitations that Congress imposed on the availability of the federal subsidies," the suit states.

    The IRS regulation at issue, handed down in May 2012, stated that taxes can be collected for policies purchased on the federal exchanges. Critics of the lawsuits have suggested the apparent discrepancy between the law and the IRS rule was little more than a "drafting error," and the clear intent of the law was to allow subsidies through state and federal exchanges.

    The federal government has not filed a response to the Halbig lawsuit, but with Friedman stating he plans to issue a ruling by Feb. 15, the government will have to respond quickly, Kazman said.

    "Our individual plaintiffs allege a sort of liberty interest in arguing that they should not be subject to the enrollment process at all, because if the decision of the states in which they live was respected by the IRS, they shouldn't have to be doing this," Kazman said. Plaintiffs also argue the requirement to purchase insurance harms them financially.

    "Congress had drawn this distinction between states that participate and [34] states that don't. We call the latter affectionately the refusenik states" where federal exchanges are in place, he said.

    Unlike the lawsuits several states have filed against the health care law, Halbig does not base its argument on federalism or states' rights. He said the plaintiffs in the D.C. case are "talking strictly in terms of what the statute says versus what the IRS rule says."

    Some legal observers have written that the individual plaintiffs had the biggest win at this stage of the lawsuit, while the businesses may have a tougher time as the lawsuit moves forward.

    "The judge did deny our request for preliminary injunction" to bar the immediate collection of tax penalties of $2,000 per employee from businesses that do not offer Obamacare-compliant insurance to employees, Kazman said. Revenues from those penalties will pay for the tax credit subsidies and are vital to Obamacare's implementation.

    Friedman "is setting a very fast schedule for the filing of what's called a summary judgment," Kazman said. Summary judgment occurs if no facts in a case are disputed. A court hearing and witnesses are not required because everything can be laid out on paper. "[E]verything should be filed soon. The court might have an oral hearing," he said.

    "Win or lose, of course, it will be appealed," he said.

    Other lawsuits

    "[W]e've got a similar case that's going to be argued [Oct. 31] in federal court in Richmond, Va. Different plaintiffs, but the same issues as in our D.C. case," Kazman said.

    "Oklahoma also has a court case pending. Back in August they survived a motion by the government to dismiss. And I think they're proceeding on some schedule for summary judgment as well," he said.

    "The state of Indiana more recently filed a similar court case, and I think both of those state cases raise some constitutional issues that our case does not," Kazman said.

    A number of other lawsuits around the country against Obamacare are at various stages in the judicial process.

    Christine Sandefur, a staff attorney at the Arizona-based Goldwater Institute's Scharf-Norton Center for Constitutional Litigation, said Obamacare's Independent Payment Advisory Board is of particular concern to her organization.

    "The Goldwater Institute has been for three years involved in a legal battle against the Independent Payment Advisory Board," she said. "This is the death panel in Obamacare. This is 15 unelected, unaccountable bureaucrats who have virtually unlimited power to set Medicare costs."

    If legislation repealing the board's authority does not become law, "Congress completely loses its power to ever supersede anything that IPAB does," Sandefur said. "We see this as one of the worst violations of the separation of powers in this country's history."

    The case is now before the U.S. Circuit Court of Appeals for the 9th Circuit.

    Tim Sandefur, her husband, is staff attorney at the Pacific Legal Foundation, which also is suing to derail Obamacare on constitutional grounds.

    That suit notes that Obamacare was initiated as Senate legislation, and its employer mandate penalties have been ruled a tax by the Supreme Court. But Article I, Section 7 of the Constitution states, "All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other bills." This lawsuit argues that Obamacare violates Article I.

    "Senators took a bill that had passed in the House and had absolutely nothing to do with health care, or health insurance, or individual mandates, and gutted it completely through what they call the strike-and-amend procedure," he said.

    They "replaced it with what became the Patient Protection and Affordable Care Act, and then called that a Senate amendment to a House-initiated bill. We say that's unconstitutional," Sandefur said.

    Opening briefs in that suit should be filed soon in the U.S. Court of Appeals for the D.C. Circuit.