Business and Economics

Lawmaker Concerned About ACA Lawsuit Impact On Tax Breaks

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October 9, 2013 —

INDIANAPOLIS – A key House Democrat says a lawsuit filed by the attorney general challenging the Affordable Care Act could lead to 400,000 Hoosiers losing out on tax breaks meant to make the insurance more affordable.

Rep. Ed Delaney of Indianapolis, who has been active on health care policy issues in the legislature, said the suit filed Tuesday by the state and 15 school districts is “dashing the hopes of Hoosiers on purpose.” But Delaney went beyond blaming Zoeller and put the issue square at Gov. Mike Pence’s feet.

“What he’s saying, as the governor of our people, is that he does not want federal tax dollars that have been paid to the federal government to be used to help the people of Indiana,” Delaney said. “That is incredible. That is neglectful.”

The suit accuses the Internal Revenue Service of going beyond the Affordable Care Act’s authorizations by extending the tax breaks – which are meant to be subsidies – to residents of all states. The suit said the law only authorizes the tax credits for people living in states that are operating state-based exchanges, which are essentially marketplaces for insurance.  Indiana and most other states opted not to create their own exchanges and let the federal government do the job instead.

That’s important because the health care law – also known as Obamacare – 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.  But as revised by the IRS, the health care program opens the subsidies to residents of all states – including Indiana – which also makes companies in the state subject to the penalties.

That affects private firms and nonprofit organizations but also government entities, Zoeller said. And Congress doesn’t have the authority to impose taxes or tax penalties on state or local governments, Zoeller said.

But Delaney said that for the state’s argument to have merit, it would mean stripping the tax breaks away from all Hoosiers. He said the U.S. Supreme Court has already upheld the Affordable Care Act as constitutional in a case in which the state was a plaintiff and that the new challenge is frivolous.

“Mr. Zoeller lost this argument in the Supreme Court,” Delaney said. “He’s asking for a do over, a video replay.”

The U.S. Supreme Court upheld the Affordable Care Act’s mandate that individuals purchase insurance and most other aspects of the law. But the court did rule that Congress couldn’t force states to expand Medicaid.
Zoeller said that decision combined with rules President Barack Obama’s administration has made since then mean there are still issues for the court to consider.

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