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Wednesday, June 19, 2024 | Back issues
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Obamacare Subsidy May See State Intervention

OKLAHOMA CITY (CN) - With the Supreme Court poised to hear a Virginia challenge of tax subsidies underpinning the federal health care reform law, Oklahoma has put its hat in the ring.

Since Oklahoma opted out of creating its own health insurance marketplace under the Patient Protection and Affordable Care Act, the U.S. Department of Health and Human Services set up and operates an exchange there.

The Internal Revenue Service meanwhile has a rule that extends premium-assistance tax credits to anyone "enrolled in one of more qualified health plans through an exchange," whether run by the state or the federal Department of Health and Human Services.

Oklahoma brought a federal complaint in 2011 because receipt by just one state employee of a tax credit for enrolling in a HHS-offered plan would trigger the state's liability since Obamacare penalizes large employers that fail to provide adequate coverage.

The U.S. government has already appealed to the 10th Circuit after U.S. District Judge Ronald White in Muskogee, Okla., sided with the state in vacating the IRS subsidy rule as it pertains to states that have not set up Obamacare marketplaces.

Attorney General Scott Pruitt filed a petition for certiorari with the high court on Thursday, however, based on the recent decision by the justices to take up a different Obamacare subsidy case from Virginia.

Since none of the litigants in King v. Burwell, the Virginia case, are states, Oklahoma says the justices should hear King and its case "together so that the common question can be resolved with the court having before it all categories of parties with an interest in resolution of that question.."

"It is the states that Congress commanded to create exchanges in the first place," the 13-page petition states. "It is also the states that Congress acknowledged have flexibility in whether to establish exchanges. Whether the consequences of those decisions include the availability of subsidies - and onerous large employer costs - means a great deal to the states. Oklahoma is the only litigant at hand that is a state who had to make the critical decision whether to establish an exchange pursuant to the statutory rights granted by Congress."

None of the King litigants are subject to the large-employer mandate, either, AG Pruitt says.

"Their insurance coverage obligations, penalty risks, and compliance costs depend on the availability of tax credits and subsidies," the petition states. "Oklahoma is the only litigant at hand that is a large employer subject to these obligations."

Oklahoma claims it is "uniquely situated" as the only party who can decide to create an exchange.

It is "absolutely paramount" the Supreme Court hears the lawsuit "to ensure state's rights are on the table when a decision is made," Pruitt said in a statement.

"We as a state brought this to the Court's attention from the very beginning, being the first in the nation to challenge the legality of the law," the AG added. "Congress empowered the states with the decision of whether to establish an exchange but the IRS has tried to circumvent that intent by allowing billions in illegal subsidies to be paid out. Such a clear overreach by a federal agency directly impacts the ability of the states to make the exchange decision as Congress intended."

Pruitt notes that Judge White had let it introduce statements by economist Jonathan Gruber, the "architect of the ACA," in which "Gruber admitted that the ACA was designed to withhold tax credits in States that declined to establish exchanges as a means of pressuring the states into establishing state exchanges."

In 2012 Gruber said that the ACA carries "a huge role for states, to actually run these exchanges, and decide how people get health insurance in these states," as quoted in the petition.

Pruitt said the "illegal actions of the IRS" impact Oklahoma citizens.

"We have been on the front lines of this issue and will continue to battle to uphold the rule of law," he said. "We hope that the court will grant our request for review to ensure the input of the states is considered when deciding this important question.

In his 20-page opinion, White deemed the IRS rule as "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law, in excess of statutory jurisdiction, authority, or limitations, or short of statutory right, or otherwise is an invalid implementation of the ACA."

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