Could This Lawsuit Really 'Fatally Cripple' Obamacare?

A federal judge on Tuesday declined to dismiss a lawsuit that could "fatally cripple" Obamacare, the Daily Mail reports.

A group of small businesses have reportedly filed a lawsuit claiming that the Affordable Care Act, or Obamacare, prevents the federal government from enforcing the federal law, as passed by Congress, in any state that chooses not to set up its own health care exchange. However, there seems to be another provision that could provide the feds a way around that.

A total of 36 states chose not set up its own exchanges.

A woman looks at the HealthCare. gov insurance exchange internet site October 1, 2013 in Washington, DC. US President Barack Obama's Affordable Care Act, or Obamacare as it is commonly called, passed in March 2010, went into effect Tuesday at 8am EST. Credit: AFP/Getty Images

More from the Daily Mail:

The Obama administration, according to their lawsuit, has ignored that language in the law, enforcing all of its provisions even in states where the federal government is operating the insurance marketplaces on the error-plagued Healthcare.gov website.

Thirty-six states chose not to set up their exchanges, a move that effectively froze Washington, D.C. out of the authority to pay subsidies and other pot-sweeteners to convince citizens in those states to buy medical insurance.

But the IRS overstepped its authority by paying subsidies in those states anyway, say the businesses and their lawyers.

Obamacare reportedly only gives the federal government the authority to issue subsidies for policies bought "through an Exchange established by the State."

However, there is also another provision that gives the federal government the authority to set up its own individual exchanges in the states that opt out.

In the spring, there were those who loved Obamacare... (Photo: AP/Charles Dharapak)

Attorneys representing the federal government insist that "Congress made clear that an exchange established by the federal government stands in the shoes of the exchange that a state chooses not to establish."

In other words, the Obama administration contends the law has been "reasonably interpreted" by the Treasury Department to "provide for eligibility for the premium tax credits for individuals in every state, regardless of which entity operates the exchange."

But lawyer Sam Kazman says the feds are deliberately skirting that part of the law.

"[W]ithout those subsidies, the employer mandate isn't triggered," he told the Daily Mail, adding that if that happens, the entire Obamacare system could crumble.

After a ruling by the U.S. Supreme Court upheld Obamacare, many people may feel like nothing -- outside of a full repeal of law -- will be able to stop the health care overhaul.

To read the Daily Mail's entire report, click here.

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