WASHINGTON – A group of small businesses has filed a lawsuit challenging a rule imposed by the Internal Revenue Service under the federal health care law, alleging the agency exceeded its authority by expanding the law’s employer mandate.
Business owners in Virginia and five other states claim the IRS rule places burdens on small businesses in states that have declined to set up health care exchanges under the Affordable Care Act.
The Act authorizes health insurance subsidies for qualifying individuals in states that set up the exchanges, but the subsidies also trigger the law’s employer mandate, which imposes a $2,000-per-employee penalty on employers who fail to maintain a minimum level of health insurance coverage for their employees.
But in the lawsuit filed May 2 in federal court in the District of Columbia, the plaintiffs claim that the IRS rule expands the employer mandate to all 50 states — something only Congress has the power to do.
“The IRS rule we are challenging is at war with the Act’s plain language and completely rewrites the deal that Congress made with the states on running these insurance exchanges,” said the plaintiffs’ attorney Michael A. Carvin, of Washington, D.C., in a statement announcing the lawsuit. Carvin argued before the U.S. Supreme Court last year on behalf of businesses challenging the constitutionality of the health care law.
The plaintiffs in the suit claim their businesses will be harmed by the IRS regulation. The rule would force them to choose between laying off workers or paying for costly insurance packages they don’t need or want, they argue.
To date, 33 states have declined to set up health care exchanges that trigger the mandates. In December, Virginia Gov. Bob McDonnell told federal officials that the state would not set up an exchange under the health care law.
The lawsuit is the latest chapter in ongoing litigation over the health care law and its employer mandate. A constitutional challenge to the employer mandate is currently pending before the 4th U.S. Circuit Court of Appeals and is expected to reach the Supreme Court as soon as next term.
— Kimberly Atkins, Dolan NewsWire