In June of 2012, the Supreme Court made a landmark decision deeming the controversial Obama health care law's individual mandate constitutional and upholding the Affordable Care Act (5-4). The Court determined that the mandate could be enforced as a tax, a power held by Congress under the Constitution. Since the law was upheld, Republicans, including presidential candidate Mitt Romney, have vowed to repeal the law, and groups such as Americans for Prosperity have spent millions of dollars on health care attack ads in key swing states. Just recently, on September 19th, Oklahoma filed a suit against the ACA again. But on what grounds?
The media hasn't explained this case well; headlines hint that Oklahoma is challenging the legality of the employer-mandate provision of the law, similar to the lawsuit in June. However, this is not true. Rather, Oklahoma is challenging the implementation of the employer mandate – the distinction, an important one.
Here's the idea.
Under the ACA, legislation allows states to choose whether or not they want to set up a state-run health insurance exchange. If a state chooses not to set up an exchange the federal government will set up an exchange in its place. The reasoning for a state or federal exchange is to allow residents, who are not offered health insurance through their employers, an affordable option to obtain insurance.
If a state chooses to set up an exchange, and large employers in that state choose not to provide health insurance options to their employers, the state can fine the employers under the employer-mandate penalty. This money will then be given back to employees in the form of a subsidy to purchase health care through the state-run exchange.
Scott Pruitt, the attorney general of Oklahoma, argues that under the ACA employers can only be fined if the state sets up an exchange. He believes the employer mandate penalty does not apply under a federal-run exchange. The state's policy decision not to set up an exchange should therefore protect employers from the penalty under a federal-run insurance exchange, which is implemented in the absence of state-run exchange.
So here's the problem. The IRS has decided to apply these penalties on large-scale employers under state and federal exchanges. Scott Pruitt is challenging the IRS on the grounds that they are fining employers without actually being granted the power to do so. The IRS is an agency and therefore only has the power which Congress grants it. Oklahoma is challenging this agency on the grounds that the IRS is violating the Administrative Procedures Act, which prevents an agency from exercising powers which have not been granted to them. As Scott Pruitt argues, the IRS has altered the effect of the law through regulation and implementation, potentially harming the people of Oklahoma in a way that was not intended by the law.