Sunday, March 7, 2021

Indiana & 15 school districts sue IRS over Obamacare


There’s a certain pragmatism that has come out of the somewhat bipartisan vote to reopen the government and avoid a default on our nation’s obligations.

We can hypothesize about whether a shutdown and the devastating effects it had on the nation’s reputation, families, and business were necessary to achieve this new-found hope, but any such speculation would be just that—a hypothesis. The shutdown did happen.

It’s clear now that sticking to your guns with a hard line against a single policy doesn’t work. It is ineffective. It’s not so much that Washington does business in a way that shuts out disagreement; it’s just that Washington does business as Washington always has: from the middle out. It is simply impossible to govern this country—or to get anything real done in government—from either the left or the right. It won’t fly, or your tactics will destroy the government.

“You don’t like a particular policy or a particular president, then argue for your position,” the New York Times quoted President Obama as saying. “Go out there and win an election. Push to change it. But don’t break it, don’t break what our predecessors spent over two centuries building.”


There’s a plethora of reasonable objections to the Affordable Care Act, known as Obamacare, and when Tea Party representatives move to put the government of the US on indeterminate furlough, nobody listens to reason.

But there are reasonable arguments being put forth about some of the holes in the ACA. One such argument comes from Indiana, where a new state superintendent, a former teacher who all but ousted Tony Bennett from the position in last year’s election, is fighting it out in more than one way with a conservative governor. In that context, we can understand the politics of schools in Indiana, but just because some action is political doesn’t make it wrong.

Now comes the state’s attorney general, Greg Zoeller, who last week filed suit in federal court, along with 15 school districts, based on one of the provisions of the ACA. The schools claim that the employer mandate in the ACA can’t properly be enforced against a government employer, namely the public schools of Indiana, because the ACA doesn’t allow the IRS to penalize a state government that way.

They want a district court judge in southern Indiana to issue an injunction or make a declaratory judgment that the IRS can’t penalize a state government (or its public schools) under the Affordable Care Act if the state didn’t create its own health insurance exchanges. Indiana is one such state, where residents have to use the federal exchange.

As you may know, employers who have more than a certain number of employees, as set by law, will pay a penalty if they don’t provide health insurance for their employees. Under ACA, they either pay for health insurance or pay a penalty, which the Supreme Court has said is a tax.

What Mr Zoeller and the Indiana school corporations are asking the courts to determine is whether or not the federal government can apply a “tax” to a state government or its political subdivisions, like the schools.

See, that’s a good question, and it’ll be an interesting argument. And I’m not sure it applies only in states that didn’t set up their own exchanges, either.

‚ÄúThis case is about the fundamental relationship between the state and federal government,” Mr Zoeller wrote in a press release. “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.

“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. We are raising this respectful challenge for the federal courts to decide these questions.”

Depending on this and probably similar cases being contemplated nationwide, schools may need to look at collective bargaining agreements and consider adding coverage if they don’t already provide it for their employees or change the way they hire employees. The questions are just beginning, so it’s not easy to predict where it will go. But these questions are far more interesting than “Should we shut the government down so we can miserably fail to get our way?”

Paul Katula
Paul Katula is the executive editor of the Voxitatis Research Foundation, which publishes this blog. For more information, see the About page.

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