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Blog

    Obama Administration Illegally Amends Obamacare

    07/06/2013

    The Obama Administration has taken an axe to the Affordable Care Act, after finally admitting that it is too complex to implement. The move to delay the employer mandate appears to be illegal on its face. It is also further redundant proof that Obamacare must be repealed.

    As announced in a post on the Treasury blog, the administration, through the IRS, is delaying the implementation of "reporting requirements", leading to a one-year suspension of the mandate that employers provide health insurance to their full-time employees.

    The announcement was leaked to two reporters from Bloomberg News, and was originally scheduled to be made the eve of the July 4th federal holiday. With the President out of the country and available to comment only to captive White House correspondents, that would assure the minimum news coverage. The leak forced the posting from former IRS employee Assistant Treasury Secretary for Tax Policy Mark Mazur:  

    The Administration is announcing that it will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin. 

    A release from Congressman Steve King of Iowa explains the first problem with that sentence:

    If President Obama wants to make changes to ObamaCare, he must come to Congress," said King. "Two years ago, the Obama Administration, through a memo from a Homeland Security Department bureaucrat, declared it would not enforce our nation's immigration laws. Now the Obama Administration, through a blog post by an Assistant Secretary in the Treasury Department, is declaring it won't even enforce its own health care law on employers. We live in a Constitutional Republic. We are a nation governed by laws written by Congress, not memos and blog posts written by bureaucrats.

    Though Rep King stops short of saying so, this change exceeds Administration's authority (more on that below). Back to the blog post written by the bureaucrat:

    This is designed to meet two goals.  First, it will allow us to consider ways to simplify the new reporting requirements consistent with the law.  Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees. 

    That is an admission that both the implementation and the design of Obamacare are too burdensome for American business. If you have to simplify the procedures you just created, that means you overreached and made a mess of things. And after three years, if you still haven't been able to "adapt health coverage and reporting systems" to the new law, it means that Obamacare's basic design is too complex and heavy-handed ever to accomplish its goals.

    Within the next week, we will publish formal guidance describing this transition.  Just like the Administration’s effort to turn the initial 21-page application for health insurance into a three-page application, we are working hard to adapt and to be flexible about reporting requirements as we implement the law. 

    No, this is not just like simplifying the health insurance application to 3 pages from 21. That was a minor change which, though embarrassing, had no further impact. This wreaks havoc on the structure of the entire law, and requires Congressional authority to perform.

    But why could the government think it's legal?

    Here is some additional detail.  The ACA includes information reporting (under section 6055) by insurers, self-insuring employers, and other parties that provide health coverage.  It also requires information reporting (under section 6056) by certain employers with respect to the health coverage offered to their full-time employees. 

    What does Section 6055 of the US Code (created by Obamacare section 1502) say?

    ‘‘SEC. 6055. REPORTING OF HEALTH INSURANCE COVERAGE. ‘‘(a) IN GENERAL.—Every person who provides minimum essential coverage to an individual during a calendar year shall, at such time as the Secretary may prescribe, make a return described in subsection (b). ‘

    ‘(b) FORM AND MANNER OF RETURN.—
    [...] 

    While insurers and businesses are required to make a return (because it says "shall"), that is only "at such a time as the Secretary may prescribe". It is all conditioned on the Secretary deciding when it is to occur. If the Secretary "may" do something, then the Secretary may not do it, as well. 

    But the context of the provision makes clear that the Secretary's discretion is only as to the timing and frequency of reports, not to whether they are required. Nor does it give the Secretary any leeway not to accept reports that are given merely on the basis that the government is not ready for them.

    Failing to accept 6055 reports from employers and insurers means not being able to demand payments. But that's the claim: they aren't ready, so they're pushing it back a year. As the bureaucrat's blog post puts it:

    We recognize that this transition relief will make it impractical to determine which employers owe shared responsibility payments (under section 4980H) for 2014.  Accordingly, we are extending this transition relief to the employer shared responsibility payments.  These payments will not apply for 2014.  Any employer shared responsibility payments will not apply until 2015. 

    Section 4980H was added by Section 1513 of the ACA. It lists explicitly the effective date of this phase of the law, which is 2014. It then ties the Secretary's hands by saying the mandate penalty taxes must be collected in the same manner as other penalties under the tax code: 

    Section 1513 says this all begins in January, 2014:

    (d) Effective Date- The amendments made by this section shall apply to months beginning after December 31, 2013.

    And then 1513 adds section 4980H(e). Here are parts (1) and (2):

    ‘‘(e) ADMINISTRATION AND PROCEDURE.—‘

    ‘(1) IN GENERAL.—Any assessable payment provided by this section shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68.‘

    ‘(2) TIME FOR PAYMENT.—The Secretary may provide for the payment of any assessable payment provided by this section on an annual, monthly, or other periodic basis as the Secretary may prescribe.

    So what is subchapter B of Chapter 68? It says taxes must be collected:

    (a) General rule

    Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. 

    Any payments due under the employer mandate are due only upon demand by the Secretary, and are subject to any schedule the Secretary decides to make. But these are taxes, the Supreme Court has ruled, and must be collected by the same rules as other taxes.

    It is as unlawful for the executive branch to refuse to collect these taxes as it would be for businesses to refuse to pay them.

    Illegality aside, the effect of this change will be to make Obamacare even less functional. Since premium subsidies for the Exchanges are based on whether or not employers offer "affordable" coverage,  employees will not be eligible for subsidies ("premium tax credits"). That will reduce even further the number of people, especially the number of young, healthy people, who buy insurance on the Exchanges.

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    UPDATE: On July 5, HHS quietly entered into the Federal Register a notice of "final rule", amending an earlier final rule and finalizing other proposed rules. That rule says (among other things) that in states that have created their own exchanges, individuals will be able to self-certify eligibility to get Exchange subsidies. 

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    Insurers who are not already contractually committed to participating on an Exchange should run away as fast as they can.

    The Affordable Care Act should be fully repealed. The best way to do it is to include a provision for full repeal in any bill to raise the debt ceiling, continuing resolution to fund the government, executive branch appropriations bills, or any other bill the President and his leftist allies believe is essential. Let them scream and complain all they want.  It's time to end this charade, before it ends America.