INDIANAPOLIS — The lawsuit Attorney General Greg Zoeller and 15 Indiana school districts have filed against the IRS could also block federal subsidies for state residents enrolling in the health exchange that's part of the federal health overhaul.
The lawsuit, filed earlier this week, says the federal government lacks standing to require health benefits for any employee who works more than 30 hours in a week.
It also says states with federally run exchanges, Indiana among them, are exempt from the employer mandate as well as federal tax credits, arguing that only state-run exchanges would qualify for tax credits, based on its reading of the 2009 law.
"Therefore there is no premium assistance subsidy under the ACA unless the citizen pays for insurance obtained through a State Exchange," the lawsuit says.
The potential fallout from the lawsuit comes shortly after the federal exchange opened on Oct. 1, and as the federal government continues wrangling with technical troubles, which have stalled enrollment nationwide.
Zoeller spokesman Bryan Corbin said the lawsuit is focused on the "tens of millions of dollars" the state could be forced to pay the federal government in tax penalties if it wrongly classifies an employee.
"Our focus is not private-sector workers who use exchanges but the State itself which faces huge penalties if it doesn't get out from under the employer mandate," Corbin said in an email Friday.
The lawsuit is part of a broader movement looking to spare businesses the cost of the mandate — Oklahoma has filed a similar suit, as well as the National Federation of Independent Businesses.
But with the argument that state-run exchanges only qualify for tax credits, more than 500,000 lower- and middle-income Indiana residents could lose that which makes the health plans affordable. The credits are applied upon enrollment in the exchange.
Insurers qualified to sell in Indiana are offering plans with a wide range of costs depending on how many people will be covered and the amount of coverage sought. The mid-level "silver" health plans are expected to be the most popular.
Supporters of the health care law said they were still evaluating whether Indiana's lawsuit could prove to be a serious problem. What was immediately clear, however, was the provision adds to an already confusing public discussion of the health insurance exchanges.
"The concern is about how it will impact public information and education," said Lucinda Nord, vice president of public policy for the United Way of Indiana.
Republican Gov. Mike Pence decided last year that Indiana should opt to let the federal government and has since become one of 36 states whose residents must buy insurance through the federal website. Pence's decision was not based on exploiting a loophole in the law, spokeswoman Kara Brooks said, but instead based on cost concerns for the state.