Oklahoma Suit May Knock Out Obamacare

Why didn’t anyone else think of it?

Scott Pruitt, the Attorney General of Oklahoma, acting on the research of Jonathan H. Adler and Michael F. Cannon published in the Case Western Reserve School of Law Journal, has brought a new lawsuit, on behalf of the state, against Obamacare.

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Unlike the suit brought by 26 state attorney generals, this suit does not make a constitutional objection to the Affordable Care Act. Instead, it uses the language of the law to challenge the elaborate system of subsidies, tax credits, and individual or employer mandates and fines the act has spawned.

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Adler and Cannon studied the actual text of the law — something Congress never did — and found that it explicitly provided that subsidy only to those who got their insurance through state exchanges. Indeed, the subsidies and tax credits were intended to be the carrot that induced states to set up exchanges rather than force the feds to set up their own.

The IRS has ruled that the language of the statute should be “interpreted” to extend the subsidies to those enrolled in state or federal exchanges, but that’s not what the law says. Section 1401 of the act, according to their article “authorizes premium-assistance tax credits and makes the available only through state-run exchanges.”

The section says that taxpayers may receive a tax credit only if “the taxpayer is covered by a qualified health plan … that was enrolled in through an exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act.”

Adler and Cannon argue that “by its express terms, this provision only applies to exchanges “established by a state” and “established … under Section 1311.” Section 1401 further emphasizes that tax credits are available only through Section 1311 exchanges.”

The IRS and defenders of the legislation try to stretch the language to imply a mandate to cover those in federal exchanges. IRS director Douglas Schulmann, answering a letter from Republican Congressmen about whether the subsidies are limited to state exchanges, wrote:

“The statute includes language that indicates that individuals are eligible for tax credits whether they are enrolled through a state-based exchange or a federally-facilitated exchange.”

Unfortunately for President Obama, the statute implies no such thing. It is not only silent on any subsidies for federal exchanges, it is clear that the subsidies were intended to encourage states to set up exchanges.

The Oklahoma suit has survived a motion to dismiss and its standing to bring the suit has been affirmed by the District Court. Attorney General Pruitt hopes for a judgment later this year and feels the case might reach the Supreme Court by late next year.


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