Oklahoma attorney general Scott Pruitt
The first legal challenges to Obamacare rested on constitutional principles, but a new effort out of Oklahoma goes after the cogs that make the law function. State attorney general Scott Pruitt is trying to block the Internal Revenue Service from imposing fees on employers and individuals who don’t comply with the law’s mandates. In doing so, he may create a way for other states to fight back against the federal government’s top-down management of health care. If the suit succeeds, the law will not be invalidated, but if enough states choose to opt out, the resulting lack of funds could make Obamacare’s financial structure untenable.
“This is a very important case,” Pruitt tells National Review Online. “This is a challenge to the implementation of the Affordable Care Act (ACA), and it matters.”
Yesterday the federal government filed a motion to dismiss Pruitt’s case, challenging Oklahoma’s standing and also citing the Anti-Injunction Act, which prevents people from suing to avoid paying their taxes. The next step is for Pruitt to file a response, which is due December 31.
Oklahoma’s legal argument is complex, a logical train that derives from the convoluted provisions of the law. The implications are worth the effort it takes to understand them, though it certainly takes some determination. Here we go.
Point one: The ACA offers tax credits and subsidies to individuals and companies that buy insurance through a state-run exchange — if their state has set up such an exchange. Point two: The federal government establishes exchanges for states that do not set up their own. Point three: The section of the ACA that establishes these credits and subsidies says they are authorized only for exchanges “established by a state.” (Michael Cannon of the Cato Institute and Jonathan Adler of Case Western Reserve University Law School first noticed this provision of the ACA; the law’s defenders say it is a minor drafting error that courts will and should overlook.) Point four: The ACA also imposes fines and penalties on individuals who do not buy health insurance, and on businesses that do not buy it for their employees. (Insurance under Obamacare will be significantly more expensive than regular insurance, which is why they have to pay you to buy it and fine you if you don’t.)
Now we get to point five, which is the real crux of the argument: The ACA specifies that these fines or penalties apply only to individuals or companies that are eligible to receive the tax credits and subsidies. Conclusion: If a state chooses not to set up an exchange of its own, residents of that state are not eligible to receive tax credits or subsidies for buying insurance, so there can also be no fines or penalties for not buying insurance, even if there is a federally run exchange in the state. In other words, the individual and employer mandates are nullified in that state.