At the Weekly Standard, Chris Conover explains.
At the Weekly Standard, Chris Conover explains.
As Jonathan Adler and I detail in our Health Matrix article, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA,” the Obama administration is attempting to rescue Obamacare from oblivion by literally taxing, borrowing, and spending more than $700 billion without congressional authorization. In a recent letter to the editor of the Washington Post, I explain how these illegal taxes are already hurting workers.
On July 25, chairmen of the House Ways & Means Committee, the House Committee on Oversight & Government Reform, and two Oversight subcommittees sent a letter to Treasury Secretary Jacob Lew demanding information related to the illegal tax-credit rule.
The House Oversight Subcommittee on Health Care has announced it will hold a hearing this Wednesday, July 31, on the IRS’s illegal tax-credit rule titled, “Oversight of IRS’s Legal Basis for Expanding ObamaCare’s Taxes and Subsidies.” Adler will testify alongside Oklahoma Attorney General Scott Pruitt and Missouri physician and small business owners Charles Willey, each of whom has filed suit to block the IRS’s illegal rule.
On Sunday, The Washington Post published my letter to the editor:
The excellent July 24 front-page article “Health law’s unintended impact on part-timers” showed how President Obama’s health-care law is cutting part-time workers’ pay by forcing employers to limit these employees’ hours in order to avoid penalties. Yet the reality is even worse.
Obamacare does not authorize those penalties in states that leave the task of establishing a health insurance exchange to the federal government. That means most of the employers the article cited — the commonwealth of Virginia, various Texas employers, the Ohio-based White Castle burger chain, the city of Dearborn, Mich., and Utah’s Granite School District — don’t need to cut part-timers’ hours, because the federal government has no authority to penalize them.
Yet the Obama administration has decreed it will do so anyway, contrary to the clear language of federal law, proving that taxation without representation is not confined to the District.
Two lawsuits have been filed to stop this illegal action — one by the state of Oklahoma, another by employers and individual taxpayers in Kansas, Missouri, Tennessee, Texas, Virginia and West Virginia.
Even so, thousands of part-time workers are already losing wages because of a tax Congress did not authorize. As underemployed music professor Kevin Pace told The Post, “This isn’t right on any level.”
Michael F. Cannon, Washington
The writer is director of health policy studies at the Cato Institute.
On Wednesday, July 31, a House oversight subcommittee will be holding a hearing on the IRS’s illegal taxes, borrowing, and spending.
The Washington Post has published a remarkable exposé on the Obama administration’s foundering efforts to implement ObamaCare.
The article paints a picture of a White House that did not know what it was getting into, either in terms of public opposition or the technical challenges of implementation. It likens the task of getting young adults to buy ObamaCare’s health plans to getting young adults to vote, despite a glaring difference between those challenges. (Hint: one of them requires young adults to shell out hundreds of dollars per month.) But this exposé is most remarkable for not exposing two lawsuits that by far pose the greatest challenge to ObamaCare’s survival.
One indication that implementation is not going well is what the Post quotes ObamaCare’s supporters as saying:
“In 2011, there was this ‘we’re going to save the world’ mentality. In 2013, it focuses more on how do we deliver on the requirements of the law.”
“It’s pretty much a black box.”
“They tell us, ‘It’s freakishly on schedule.’ They use those exact words. But only the people who work in this can tell you if it’s actually running on time.”
“Advocates on the ground are really struggling with that group. They want to have a positive message but don’t know what to say.”
“We’re in an environment [now] where 40 percent are against it, 35 percent are for it and neither side knows what’s actually in it.”
“How hard does the insurance department or Medicaid department in a red state [that opposes the law] make it to implement this?”
“Everybody is having sleepless nights given the magnitude of the effort and the short amount of time.”
“It’s like building a bridge from both ends and hoping, in the end, they connect.”
“I read [the delay of the employer-mandate] as an admission that not all of the components of the [data] hub are working.”
“Some of the guidance from the federal government is still coming. That means we can’t get to our wishlist.”
As bad as these evaluations are, things are actually quite a bit worse.
For one thing, the HuffingtonPost/Pollster.com polling aggregator currently shows that 52.5 percent of Americans are against ObamaCare, compared to 40.5 percent are for it. That’s a 12-point gap, not a five-point gap. It’s also the largest gap that aggregator has ever measured.
For another, the Washington Post acknowledges that if young adults don’t sign up for ObamaCare’s over-priced insurance “the law will fail,” and acknowledges the difficulty of getting young adults to over-pay for insurance. But it still downplays that challenge:
When…asked in a recent survey whether a $210 premium was affordable, only 29 percent of likely marketplace enrollees said yes. [Marketers then told] participants that, with their tax credits, they would save “$1,908 a year compared to what you would pay on your own.”
All of a sudden, 48 percent of the participants thought that insurance was affordable. But 48 percent is still less than half.
That number will turn out to be even lower when young adults realize they’re still shelling out that $210 they already said they cannot afford.
But the Post neglects to mention the greatest threat to the law’s survival: those tax credits may not even be there in two-thirds of the country.
The attorney general of Oklahoma, and a group of small employers and individuals from various states, have each filed lawsuits challenging the Obama administration’s plans to issue those tax credits in the 34 states that have opted not to establish one of ObamaCare’s health insurance “exchanges” themselves. The statute quite clearly authorizes those credits (and related subsidies) only “through an Exchange established by the State.” Nowhere, and in no way, does federal law allow the administration to issue entitlements through the 34 state-based Exchanges established and operated by the federal government. Yet the White House is trying to spend an estimated $700 billion over 10 years in those states without congressional authorization.
Both the non-partisan Congressional Research Service and Harvard Law Review have acknowledged these lawsuits are credible. Plaintiffs in one of the suits have asked the court to block that illegal spending before it begins in 2014. Supporters of the law admit that if that happens, ObamaCare doesn’t just fail, it collapses.
So the question this supposed exposé really answers is: aside from that, Mrs. Lincoln, how’s ObamaCare implementation going?
Obamacare had a rough day in court yesterday. In Liberty University v. Lew, the Court of Appeals for the Fourth Circuit ruled against Liberty University’s challenge to various aspects of the law. One might think, as SCOTUSblog reported, this was a victory for the Obama administration.
In the process, however, the Fourth Circuit undercut three arguments the administration hopes will derail two lawsuits that pose an even greater threat to Obamacare’s survival, Pruitt v. Sebelius and Halbig v. Sebelius.
The plaintiffs in both Pruitt and Halbig claim, correctly, that Obamacare forbids the administration to issue the law’s “premium assistance tax credits” in the 34 states that have refused to establish a health insurance “exchange.” The Pruitt and Halbig plaintiffs further claim that the administration’s plans to issue those tax credits in those 34 states anyway, contrary to the statute, injures them in a number of ways. One of those injuries is that the illegal tax credits would subject the employer-plaintiffs to penalties under Obamacare’s employer mandate, from which they should be exempt. (The event that triggers penalties against an employer is when one of its workers receives a tax credit. If there are no tax credits, there can be no penalties. Therefore, under the statute, when those 34 states opted not to establish exchanges, they effectively exempted their employers from those penalties.)
The Obama administration has moved to dismiss Pruitt and Halbig on a number of grounds. First, it argues that those penalties are a tax, and the Anti-Injunction Act (AIA) prevents taxpayers from challenging the imposition of a tax before it is assessed. Second, the administration argues that the injuries claimed by the employer-plaintiffs are too speculative to establish standing. Third, shortly after announcing it would effectively repeal the employer penalties until 2015, the administration wrote the Liberty, Pruitt, and Halbig courts to argue that the delay should (at the very least) delay the courts’ consideration of those cases. In Liberty, the Fourth Circuit rejected all of those claims.
In discussing whether the “assessible payment” that the employer mandate imposes on non-compliant employers falls under the AIA, the court writes:
Last week, when most Americans were starting their Fourth of July holiday, the Obama administration announced it will wait until 2015 to implement Obamacare’s penalties against employers who fail to offer “affordable” and “minimum value” coverage to their workers, rather than impose this “employer mandate” in 2014, as the statute requires. The administration’s stated rationale is that, despite nearly four years of lead time, it still won’t have the capacity to collect from employers the information required to determine which employers will be subject to penalties in 2014. As a result, the administration also announced it would not require employers to report that information until 2015, though (again) the statute requires employers to furnish that information in 2014.
Nicholas Bagley, a professor of law at the University of Michigan, suggests that maybe there is a legal rationale for the Obama administration’s delaying these provisions. So let’s take each provision in turn.
1) Has Congress given Treasury the authority to waive the penalties? The answer is no. The employer-mandate penalties unequivocally take effect on January 1, 2014, and the PPACA gives the Treasury secretary no authority to postpone their imposition.
Every element of the employer mandate demonstrates that it takes effect in 2014.
The statute gives the Treasury secretary the authority to collect these penalties “on an annual, monthly, or other periodic basis as the Secretary may prescribe.” It does not allow the secretary to waive the imposition of such penalties, except in one circumstance: Section 1332 authorizes the Treasury secretary to waive the employer mandate, but only as part of a state-specific waiver, and only if the state enacts a law that would provide equally comprehensive health insurance to as many residents, and only if that law would impose no additional cost to the federal government, and only if there is a “meaningful level of public input” over the waiver and its approval, and even then not until 2017. In other words, Congress spoke to the question of whether and when the executive should be able to waive the employer mandate, and Congress clearly did not want the administration to waive it unless certain specified conditions were met.
Nevertheless, Treasury claims it has the authority to waive those penalties without following Congress’ instructions: “[T]he employer shared responsibility payments…will not apply for 2014. Any employer shared responsibility payments will not apply until 2015.”
2) Has Congress given Treasury the authority to waive the reporting requirement? Again, the answer is no.
The PPACA added two sections to the Internal Revenue Code (sections 6055 & 6056) that require employers to report certain information on their health benefits and the workers who enroll in that coverage, in order to help the IRS determine whether those workers are eligible for tax credits and whether the employer is subject to penalties. Again, the statute is clear: those reporting requirements take effect in “calendar years beginning after 2013” and “periods beginning after December 31, 2013.” The statute contains no language authorizing Treasury to waive those requirements.
Bagley argues the statute does contain language that might enable Treasury to delay the imposition of these reporting requirements. Sections 6055 & 6056 state that employers must furnish this information “at such time as the Secretary may prescribe.” He writes, “Delaying the reporting requirements until 2015 is arguably just a specification of the ‘time’ at which the reports must be submitted.”
This theory reflects a misunderstanding of what an effective date is. When Congress imposes an obligation on some party, that obligation becomes effective on the effective date. The secretary’s discretion to prescribe the time at which the affected party must discharge that obligation neither affects the existence of the obligation, nor empowers the secretary to repeal it.
One might argue that Treasury has the authority to say employers need not report the required information regarding their 2014 health benefits offerings until, say, the next year, when they report the same information for their 2015 offerings. Yet that is not what Treasury is doing. Treasury claims it can altogether eliminate the obligation to report the 2014 information: “The Administration…will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin.”
Moreover, if the language Bagley cites were interpreted to permit Treasury to waive the mandate and reporting requirements for 2014, is there any reason why that interpretation would not empower Treasury waive those provisions indefinitely? Could the secretary determine employers need discharge these obligations every 1,000 years? If not, why not?
Finally, Bagley concludes no one would have standing to challenge these actions in court. Thus even if the administration’s actions are illegal, he writes, “So what?”
Let’s assume for the moment that Bagley is correct on the standing issue. Here’s “what.” The law is a mutual compact between the government and the people. The more the government acts as though it is not bound by that the law, the more widespread will be the belief among the people that they are not bound by the law, either. That would be a very bad situation. There are already enough people out there who believe the government is not bound by the law that President Obama feels it is worth his time to counsel Americans to “reject these voices” – even as his actions lend credence to them, and further diminish respect for the law. That’s a “what” that I figured law professors understood.
Many have speculated that the Obama administration isn’t prepared to roll out ObamaCare. Some have speculated that even if the administration were prepared, the rollout would still be chaotic with job losses, rate shock, employer dumping, and the like. But since the Obama administration has been remarkably secretive about the status of its implementation efforts, no one has a better perspective on its preparedness, and the potential for chaos, than the administration itself. That’s why the decision to delay the implementation of ObamaCare’s employer mandate for one year is so illuminating.
Implementing the law without the employer mandate will definitely be very chaotic. (How can the federal government determine eligibility for the law’s subsidies if it doesn’t know whether workers received an offer of adequate coverage from an employer? Will the delay cause even more employers to drop coverage? Will it lead to some workers not receiving subsidies who otherwise would? Will employers’ and workers’ responses to the delay affect the risk profile of those who seek coverage through the exchanges? If so, how will that affect insurers, who have already filed their rates based on the assumption that the employer mandate would be in place? Will this delay lead to more delays, and ultimately to repeal? Will it increase political pressure for repeal of the individual mandate?) The whole purpose of the employer mandate was to reduce the economic and political upheaval that the rest of ObamaCare will unleash.
The decision to delay this mandate suggests that, from the Obama administration’s uniquely informed vantage point, the chaos that will result from its delay will be less than what would result from implementing it when the law requires. The administration doesn’t go around looking for ways to make implementation harder. This decision can only be understood as an effort to take the path of least resistance – and if this is the path of least resistance, then ObamaCare itself must be even more chaotic. This decision is the best window we have to see how nervous the administration is about what lies ahead.
This work by Cato Institute is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.