Another Headache for the Obamacare 'Train Wreck'? Small Business Owners Sue IRS Over Employer Mandate

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Small business owners in six states are suing the federal government over an IRS regulation imposed under the Affordable Care Act (i.e. “Obamacare”) which, they say, will force them to pay hefty fines, cut their employees’ hours, or burden their businesses.

“Because of Obamacare I’ve already been forced to cut my ‘hourly’ employees’ hours from 40 down to 28 so I can keep running my business and keep my employees on the payroll,” J. Allen Tharp, CEO of Olde England’s Lion and Rose and a plaintiff in the suit, told TheBlaze.

“This law has already put my employees and me in a difficult position and if the IRS regulation is allowed to stand, I don’t want to think about what the consequences will be for the economy,” the statement adds.

Charles Willey, owner of Innovare Health Advocates in Missouri, added:

I will fight to provide health insurance for my employees but this illegal IRS rule makes it cost more and blocks healthy behavior incentives. I have over 50 employees and if I am forced to comply with this mandate, I am looking at over $100,000 in fines per year for my small business.

Here’s the background on the group's case [from their press release]:

The Affordable Care Act authorizes health insurance subsidies to qualifying individuals in states that created their own healthcare exchanges. Those subsidies trigger the employer mandate (a $2,000/employee penalty) and expose more people to the individual mandate.

But last spring, without authorization from Congress, the IRS vastly expanded those subsidies to cover states that refused to set up such exchanges.

Under the Act, businesses in these nonparticipating states should be free of the employer mandate, and the scope of the individual mandate should be reduced as well.  But because of the IRS rule, both mandates will be greatly enlarged in scope, depriving states of the power to protect their residents.

Michael Carvin, a partner at Jones Day who is representing the plaintiffs, vows to fight the IRS rule.

“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,” he said.

Sam Kazman, general counsel of the Competitive Enterprise Institute CEI (the group coordinating the lawsuit), pledges his support.

“Agencies are bound by the laws enacted by Congress,” said.  “Obamacare is already an incredibly massive program.  For the IRS to expand it even more, without congressional authorization and in a manner aimed at undercutting state choice, is flagrantly illegal.”

And there are many reasons why the plaintiffs decided to file suit:

One business can only afford to employ some full-time workers without providing health insurance, another wants to convert its employee health insurance to a completely consumer-driven health plan, and several individual plaintiffs (most of them self-employed) object to paying for costly insurance packages that they neither need nor want.

A total of 33 states have chosen not to create an exchange in order to avoid imposing the employer mandate on businesses. However, the IRS rule works against this.

“The IRS cannot rewrite the law that Congress passed,” said American Enterprise Institute's Tom Miller. “Its regulation expressly flouts the statutory text of the ACA, the intent of Congress, and the reasoned choices of 33 states.”

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“The Obama administration plans to tax, borrow, and spend more than half a trillion dollars in clear violation of Obamacare, yet still says Obamacare is ‘the law of the land,’" said Michael Cannon, director of health policy at the CATO Institute. “The courts should stop the administration before it starts imposing these illegal taxes on millions of individuals and employers in January.”

This legal complaint argues that the IRS has no legal authority to rewrite an “essential part of the law,” the group explains.

The suit is being filed in federal court in the District of Columbia.

You can read the full complaint here:

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