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Small businesses seek relief against IRS rule, individual mandate penalty

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 Businesses and residents from six states, including West Virginia, say an IRS rule puts them in a bind because it either will subject them to monetary sanctions under the individual mandate in the Affordable Care Act or alter actions to avoid paying such penalties.

The suit was filed May 2 in the U.S. District Court for the District of Columbia  by Virginia resident, Jacqueline Halbig; West Virginia resident, David Klemencic; Tennessee resident, Carrie Lowery; Texas resident and businesses, Sarah Rumpf, GC Restaurants SA, Olde England's Lion & Rose, Olde England's Lion & Rose at Castle Hills, Olde England's Lion & Rose Forum, Olde England's Lion & Rose at Sonterra, Olde England's Lion & Rose at Westlake; Missouri business Innovare Health Advocates and Kansas business, Community National Bank.

The action was filed against U.S. Secretary of Health and Human Services Kathleen Sebelius, U.S. Secretary of the Treasury Jacob Lew and acting commissioner of the Internal Revenue Steven Miller.

According to the suit, 26 states, including all but one of those represented in the suit, have opted out of the exchange. West Virginia meanwhile joins seven others with only assisting the federal government with operation of the federally-established exchanges.

In a previous interview with The State Journal, Klemencic mentioned his concerns about the health care law and its effects on small business owners.

Klemencic served as a member of the National Federation of Independent Business, which was the only business group to join 27 states in challenging the health care reform law.

The May 2 federal suit states West Virginia did not establish its own insurance exchange. Klemencic, the suit continues, would be within the range of the "unaffordability exemption" to penalties under the individual mandate without the IRS rule.

In the suit, Klemecic says he either faces the penalty or purchasing more insurance than he wants because the IRS rule made him eligible for premium assistance subsidy. Therefore, he would be disqualified from the exemption and subject to the individual mandate penalty, the suit continued.

The complaint noted that Congress set up initiatives in "carrots" and "sticks" for states to establish exchanges. Carrots included start-up grants and the offering of premium assistance subsidies from the federal treasury to help low and moderate income residents buy insurance.

"Sticks," the suit continued, meant prohibiting states from tightening Medicaid eligibility standards. If states didn't set up the exchange, they would get the "stick" instead of the carrot, which would be the federally-established and operated exchange without subsidies, the suit states.

Later, the IRS had a regulation which would authorize subsidies even in states with only federally-established exchanges, which the suit said "squarely contravenes the express text" of the Affordable Care Act and it did not take into account limitations Congress imposed on the availability of federal subsidies. 

The suit says the subsidies under the Affordable Care Act will financial injure or restrict economic choices of certain people.

The business owners and residents seek declaratory judgment that the IRS rule is illegal under the Administrative Procedure Act and they also seek injunctive relief barring enforcement.