INDIANAPOLIS – Fifteen Indiana public school districts and the state attorney general sued the federal government Tuesday over mandates and penalties from the Affordable Care Act.
The suit challenges a new IRS regulation that imposes the employer mandate requirements of the health care law onto state and local governments.
But it could cost individual Hoosiers thousands when they buy insurance under the federal marketplace.
The plaintiffs are ultimately seeking a judgment in their favor, and an immediate injunction that would prevent the IRS from financially penalizing the state and its political subdivisions.
“This case is about the fundamental relationship between the state and federal government. We respect the United States Supreme Court’s ruling last year upholding the individual mandate to buy health insurance; but it did not address the recent IRS regulations extending the reach of the ACA’s employer mandate,” Indiana Attorney General Greg Zoeller said. “We contend the ACA improperly regulates sovereign states and does not authorize the IRS to do what it is doing in treating the state as a taxable entity.”
The challenge contends Hoosiers aren’t eligible for tax credits or subsidies if they buy health insurance from the federal exchange. Likewise, though, Indiana businesses can’t be penalized.
The suit claims the Affordable Care Act specified that subsidies were limited to insurance bought through state-run exchanges.
The law passed by Congress said an employer that is required to, but does not, provide minimum essential health insurance coverage to full-time employees will incur a financial penalty if at least one full-time employee buys insurance from a state exchange and receives a federal subsidy to do so.
This means if no full-time employee receives a federal subsidy, the employer can’t be penalized, the suit contends.
When many states like Indiana opted out of running their own exchanges, the IRS passed a rule stating that residents who buy coverage on a federal exchange are entitled to the same subsidies as residents who buy from a state-run exchange.
The lawsuit also said the financial penalties of the employer mandate cannot be applied to government employers.
The suit was filed in U.S. District Court for the Southern District of Indiana.
No northeast Indiana school district is involved.