Oklahoma Attorney General Refiles Suit to Block Health Reform Provisions

By Matt Dunning

Sep. 21, 2012

Oklahoma Attorney General Scott Pruitt has revived his bid to block the federal government from enforcing certain controversial provisions of the Patient Protection and Affordable Care Act.

In an amended complaint filed Sept. 19 in the U.S. District Court for the Eastern District of Oklahoma in Muskogee, Oklahoma, Pruitt asked a federal judge to overturn an Internal Revenue Service regulation issued in May allowing some consumers to access federal subsidies for health care coverage purchased through the government-run insurance exchanges mandated under the health care reform act.

Pruitt’s amended lawsuit argues that the IRS’ regulation directly contradicts the PPACA’s original language regarding the exchanges and—more specifically—the premium subsidies, which carry significant financial penalties for certain employers that do not provide adequate and affordable employee health benefits as defined by the law.

According to the IRS’ final rule, employers with at least 50 workers that do not offer qualified coverage would incur a $2,000-per-employee penalty, excluding the first 30, if just one full-time employee uses a premium subsidy to purchase coverage offered through a state exchange or a federally facilitated exchange.

The IRS’ final rule represents a substantial change to the language passed by Congress in 2010. Under the original law, the premium subsidies were supposed to have been made available only to individuals who buy coverage through state exchanges.

Pruitt said in his lawsuit that the IRS’ “unlawful” expansion of the ACA premium subsidy rules to include federally facilitated exchanges—which the U.S. Department of Health and Human Services has said it will install in states that decline to establish their own exchanges—effectively robs states of their right to decide for themselves which course of action will most benefit their residents.

The lawsuit also claims that the expansion would erode whatever economic advantage they might have enjoyed from a favorable regulatory environment, at least when compared with states where the availability of subsidized health care through state-run exchanges increases employers’ exposure to the possibility of steep penalties.

“At present and for the foreseeable future, the State of Oklahoma has decided that the better alternative under the act for the people of the State of Oklahoma is to preserve a competitive advantage in the area of job growth over states where Section 4980H liabilities can be triggered against employers,” Pruitt wrote in his amended complaint, adding that the rules prior to the IRS’ finalization of its regulation “not only permit the State of Oklahoma to make this policy choice, but also created a mechanism, and the only mechanism, by which the State of Oklahoma can put its decision into effect.”

“The (IRS’) final rule renders the mechanism inoperative, and therefore deprives the State of Oklahoma of the ability to put its decision into effect,” Pruitt said.

In his original complaint, filed in January 2011, Pruitt had sought to bar the government from implementing the ACA’s individual mandate—and by extension, the entire law—by challenging the mandate’s constitutionality under the Commerce Clause.

Pruitt’s lawsuit was put on hold last November when the U.S. Supreme Court announced it would hear a similar lawsuit being pursued by the National Federation of Independent Businesses.

In light of the Supreme Court’s ruling in June—in which it declared the mandate unconstitutional under the Commerce Clause but legal if applied as a tax on uninsured individuals—Pruitt’s amended lawsuit appears to yield the federal government’s authority to apply the provision, as long as it doesn’t run afoul of a November 2010 amendment to the state’s constitution designed to prohibit any law that “compels, directly or indirectly, any person, employer or health care provider to participate in any health care system.”

Pruitt revised his earlier complaint’s arguments on the Commerce Clause issue and is now seeking a judgment that “recognizes the validity of the individual mandate as an exercise of (federal) taxing power” and acknowledges that the November 2010 amendment “remains valid as a protection against mandated purchases of health insurance.”

Matt Dunning writes for Business Insurance, a sister publication of Workforce Management. To comment, email

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Matt Dunning writes for Business Insurance.

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