Tag: IRS

Senate Leaders Demand Treasury, HHS Inform Consumers About Risks Of HealthCare.gov Coverage

The Obama administration is boasting that 2.5 million Americans have selected health insurance plans for 2015 through the Exchanges it operates in 36 states under the Patient Protection and Affordable Care Act, and that they are well on their way to enrolling 9.1 million Americans in Exchange coverage next year. But there’s a problem. The administration is not warning ObamaCare enrollees about significant risks associated with their coverage. By mid-2015, 5 million HealthCare.gov enrollees could see their tax liabilities increase by thousands of dollars. Their premiums could increase by 300 percent or more. Their health plans could be cancelled without any replacement plans available. Today, the U.S. Senate leadership – incoming Majority Leader Mitch McConnell (R-KY), Majority Whip John Cornyn (R-TX), Conference Chairman John Thune (R-SD), Policy Committee Chairman John Barrasso (R-WY), and Conference Vice Chairman Roy Blunt (R-MO) – wrote Treasury Secretary Jacob J. Lew and Health and Human Services Secretary Sylvia M. Burwell to demand the administration inform consumers about those risks.

First, some background.

  • The PPACA directs states to establish health-insurance Exchanges and requires the federal government to establish Exchanges in states that fail to do so.
  • The statute authorizes subsidies (nominally, “tax credits”) to certain taxpayers who purchase Exchange coverage. Those subsidies transfer much of the cost of ObamaCare’s many regulations and  mandates from the premium payer to the taxpayer. For the average recipient, Exchange subsidies cover 76 percent of their premium.
  • But there’s a catch. The law only authorizes those subsidies “through an Exchange established by the State.” The PPACA nowhere authorizes subsidies through federally established Exchanges. This makes the law’s Exchanges operate like its Medicaid expansion: if states cooperate with implementation, their residents get subsidies; if not, their residents get no subsidies.
  • Confounding expectations, 36 states refused or otherwise failed to establish Exchanges. This should have meant that Exchange subsidies would not be available in two-thirds of the country, and that many more Americans would face the full cost of the PPACA’s very expensive coverage.
  • Yet the Obama administration unilaterally decided to offer Exchange subsidies through federal Exchanges despite the lack of any statutory authorization. Because those (illegal) subsidies trigger (illegal) penalties against both individuals and employers under the PPACA’s mandates, the administration soon found itself in court.
  • Two federal courts have found the subsidies the administration is issuing to 5 million enrollees through HealthCare.gov are illegal. The Supreme Court has agreed to resolve the issue. It has granted certiorari in King v. Burwell. Oral arguments will likely occur in February or March, with a ruling due by June.
  • If the Supreme Court agrees with those lower courts that the subsidies the administration is issuing through HealthCare.gov are illegal, the repercussions for enrollees could be significant. Their subsidies would disappear. The PPACA would require them to repay the IRS whatever subsidies they already received in 2015 and 2014, which could top $10,000 for many enrollees near the poverty level. Their insurance payments would quadruple, on average. Households near the poverty level would see even larger increases. Their plans could be cancelled, and they may not be able to find replacement coverage.
  • The Obama administration knows it is exposing HealthCare.gov enrollees to these risks. But it is not telling them.

Halbig v. Burwell: House Oversight Committee Subpoenas IRS

This was a long time coming.

Those who follow Halbig v. Burwell and similar cases know the IRS stands accused of taxing, borrowing, and spending billions of dollars contrary to the clear language of federal law. The agency is quite literally subjecting more than 50 million individuals and employers to taxation without representation.

Congressional investigators have been trying to figure out how the IRS could write a rule that so clearly contradicts the plain language of the Patient Protection and Affordable Care Act. Unfortunately, the agency has been largely stonewalling their efforts to obtain documents relating the the development of the regulation challenged in the Halbig cases.

Fortunately, finally, last week the House Committe on Oversight and Government Reform used its subpoena power to demand the IRS turn over the documents that show what whent into the agency’s decision.

We’ll see if the IRS complies, or if another of the agency’s hard drives conveniently crashes.

I’ve got a fuller write-up over at Darwin’s Fool.

Cato Keeps Challenging an Illegal IRS Rule Regarding Obamacare

Last month, Cato filed a brief in the D.C. Circuit case of Halbig v. Sebelius, supporting a challenge to the IRS’s unilateral and unauthorized decision to extend tax credits to individuals who purchased health insurance from exchanges that were not established by their state. Now we’re continuing out advocacy in this area by filing a brief, joined by the Pacific Research Institute and the American Civil Rights Union, supporting the challengers in a similar Fourth Circuit case.

Here’s the background: To encourage the purchase of health insurance, the Affordable Care Act added a number of deductions, exemptions, and penalties to the federal tax code. As might be expected from a 2,700 page law, these new tax rules have the potential to interact in unforeseen and counter-intuitive ways. As first discovered by Michael Cannon and Jonathan Adler, one of these new tax provisions, when combined with state decision-making and IRS rule-making, has given Obamacare yet another legal problem. The legislation’s Section 1311 provides a generous tax credit for anyone who buys insurance from an insurance exchange “established by the State”—as an incentive for states to create the exchanges—but only 16 states have opted to do so. In the other states, the federal government established its own exchanges, as another section of the ACA specifies. But where § 1311 only explicitly authorized a tax credit for people who buy insurance from a state exchange, the IRS issued a rule interpreting § 1311 as also applying to purchases from federal exchanges. This creative interpretation hurts individuals like David King, a 63-year-old resident of Virginia.

Because buying insurance would cost King more than 8% of his income, he should be immune from Obamacare’s tax on the decision not to buy insurance (the “tax” that you’ll recall Chief Justice Roberts devised in his NFIB v. Sebelius opinion). After the IRS expanded § 1311 to subsidize people in states with federal exchanges (like Virginia), however, King could have bought health insurance for an amount low enough to again subject him to the Roberts tax. King argues that he faces these costs only because the IRS exceeded the scope of its powers.

In our latest brief, we argue that the IRS’s decision wasn’t just unauthorized, it was a blatant invasion of the powers exclusively awarded to Congress in Article I of the Constitution. This error was compounded by the district court’s holding that the IRS actions were lawful because, even if Obamacare explicitly restricts the availability of tax credits to states which set up their own exchanges, the expansion of tax-credit availability serves the law’s general purpose of making healthcare more affordable. By elevating its own perception of congressional purpose over the statutory text, the district court ignored the cardinal principle that legislative intent must be effected by the words Congress uses, not the words it may have meant or should have chosen to use.

In other words, if Congress wants to extend the tax credit, it can do so by passing new legislation. The only reason for executive-branch officials not to go back to Congress for clarification, and instead legislate by fiat, is to bypass the democratic process, thereby undermining constitutional separation of powers. This case ultimately isn’t about money, the wisdom of individual health care decision-making, or even political opposition to Obamacare. It’s about who gets to create the laws we live by: the democratically elected members of Congress, or the bureaucrats charged with no more than executing the laws that Congress passes and the president signs.

The U.S. Court of Appeals for the Fourth Circuit (based in Richmond) will hear argument in King v. Sebelius in May.

IRS Illegally Expands Obamacare

To encourage the purchase of health insurance, the Affordable Care Act added a number of deductions, exemptions, and penalties to the federal tax code. As might be expected from a 2,700-page law, these new tax laws have the potential to interact in unforeseen and counterintuitive ways. As first discovered by Michael Cannon and Jonathan Adler, one of the new tax provisions, when combined with state decisionmaking and Interal Revenue Service rulemaking, has given Obamacare yet another legal problem.

Here’s the deal: The legislation’s §1311 provides a generous tax credit for anyone who buys insurance from an insurance exchange “established by the State.” The provision was supposed to be an incentive for states to create their own exchanges, but only 16 states have opted to do so. In the other states, the federal government established its own exchange, as another section of the ACA specifies. But where §1311 only explicitly authorized a tax credit for people who buy insurance from a state exchange, the IRS issued a rule interpreting §1311 as also applying to purchases from federal exchanges.

This creative interpretation most obviously hurts employers, who are fined for every employee who receives such a tax credit/subsidy to buy an exchange plan when their employer fails to comply with the mandate to provide health insurance. But it also hurts some individuals, such as David Klemencic, a lead plaintiff in one of the lawsuits challenging the IRS’s tax-credit rule. Klemencic lives in a state, West Virginia, that never established an exchange, and for various reasons he doesn’t want to buy any of the insurance options available to him. Because buying insurance would cost him more than 8% of his income, he should be immune from Obamacare’s tax on the decision not to buy insurance. After the IRS expanded §1311 to subsidize people in states with federal exchanges, however, Klemencic could’ve bought health insurance for an amount low enough to again subject him to the tax for not buying insurance.

Klemencic and his fellow plaintiffs argue that they face these costs only because the IRS exceeded the scope of its powers by extending a tax credit not authorized by Congress. The district court rejected that argument, ruling that, under the highly deferential test courts apply to actions by administrative agencies, the IRS only had to show that its interpretation of §1311 was reasonable—which the court was satisfied it had.

Cato and the Pacific Research Institute have now filed an amicus brief supporting the plaintiffs on their appeal to the U.S. Court of Appeals for the D.C. Circuit. While it is manifestly the province of the judiciary to say “what the law is,” where the law’s text leaves no question as to its meaning—as is the case here with the phrase “established by the State”—it is neither right nor proper for a court to replace the laws passed by Congress with those of its own invention or the invention of civil servants. If Congress wants to extend the tax credit beyond the terms of the Affordable Care Act, it can do so by passing new legislation. The only reason for executive-branch officials not to go back to Congress for clarification, and instead legislate by fiat, is to bypass the democratic process, thereby undermining constitutional separation of powers.

This case ultimately isn’t about money, the wisdom of individual health care decisionmaking, or even political opposition to Obamacare. It’s about who gets to create the laws we live by: the democratically elected members of Congress or the bureaucrats charged with no more than executing the laws that Congress passes and the president signs.

Halbig v. Sebelius will be heard by the D.C. Circuit on March 25 (the same day that the Supreme Court hears the Hobby Lobby contraceptive-mandate cases).

Obama versus the Constitution

Those engaged in my line of work – explaining and defending the Constitution, the most liberty-friendly system of governance yet devised – have been kept busy by the current occupant of the White House and the executive agencies he controls. President Obama’s signature health care legislation alone provides endless “teachable moments” regarding our founding document. To paraphrase Nancy Pelosi, the more we find out about Obamacare and its implementation, the more constitutional violations we find.

But if Obamacare is the biggest constitutional – let alone policy – disaster that Barack Obama has inflicted on the nation, it alas is far from the only one. As I put it in a new Forbes.com op-ed:

One of Barack Obama’s chief accomplishments has been to return the Constitution to a central place in our public discourse.

Unfortunately, the president fomented this upswing in civic interest not by talking up the constitutional aspects of his policy agenda, but by blatantly violating the strictures of our founding document. And he’s been most frustrated with the separation of powers, which doesn’t allow him to “fundamentally transform” the country without congressional acquiescence.

But that hasn’t stopped him. In its first term, the administration launched a “We Can’t Wait” initiative, with senior aide Dan Pfeiffer explaining that “when Congress won’t act, this president will.” And earlier this year, President Obama said in announcing his new economic plans that “I will not allow gridlock, or inaction, or willful indifference to get in our way.”

And so, as we reach the end of another year of political strife that’s fundamentally based on clashing views on the role of government in society, I thought I’d update a list I made two years ago and hereby present President Obama’s top 10 constitutional violations of 2013.

Here’s the list (only half of which is Obamacare-related):

  1. Delay of Obamacare’s out-of-pocket caps. 
  2. Delay of Obamacare’s employer mandate.
  3. Delay of Obamacare’s insurance requirements.
  4. Exemption of Congress from Obamacare. 
  5. Expansion of the employer mandate penalty through IRS regulation.
  6. Political profiling by the IRS.
  7. Outlandish Supreme Court arguments. 
  8. Recess appointments. 
  9. Assault on free speech and due process on college campuses.
  10. Mini-DREAM Act.

For more details, read the whole thing. Of course, there are still two days left in the year, so who knows what else may be in store.

 

WSJ: Dems Nuked Filibuster to Defeat Halbig v. Sebelius

Wall Street Journal editorial surmises that Senate Democrats eliminated the filibuster for non-Supreme Court judicial appointments so they could pack the U.S. Court of Appeals for the D.C. Circuit with judges that would block an important ObamaCare case called Halbig v. Sebelius:

Democrats surprised Republicans in November with how quickly they dismantled the filibuster, and we are beginning to see why. Another major challenge to ObamaCare is being heard by a D.C. Circuit district judge, this time concerning whether subsidies can be delivered by the federal exchanges. Then there’s the new IRS proposed rule curtailing the political speech of 501(c)(4) groups. This rule will also probably make its way to the D.C. Circuit, and blocking GOP-leaning groups from politicking is part of the Democratic strategy for holding the Senate in 2014.

Democrats figure they have a better chance to win if they have more nominees on the appeals court—either in a three-judge panel or en banc. The plaintiffs could appeal to the Supreme Court if they lose, but you never know if the Justices will take a case.

Case Western Reserve University law professor Jonathan H. Adler and I laid the groundwork for Halbig and three other cases challenging President Obama’s attempt to tax Americans without congressional authorization in this law-journal article.

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