Healthcare mandate delay may be illegal, but challenges unlikely -experts

Tue Feb 11, 2014 7:47pm EST

Feb 11 (Reuters) - The Obama administration may have pushed the bounds of its legal authority by delaying the healthcare law requirement that certain employers provide coverage to full-time workers, but the move will be tough to challenge in court, according to legal experts.

The so-called employer mandate was originally supposed to take effect in January under the Patient Protection and Affordable Care Act, known as Obamacare. But in the middle of last year, the administration granted a one-year delay to January 2015.

Then, on Monday, the administration announced that medium-size businesses, with 50 to 99 full-time workers, would not have to comply with the requirement until 2016. Also, larger employers would be able to phase in coverage by offering a health plan to only 70 percent of their full-time workforce next year, rising to 95 percent in 2016.

Firms with fewer than 50 full-time workers are not required to provide coverage under the law.

Delays beyond January 2014 may have exceeded the administration's authority, according to legal experts, because when Congress passed the Affordable Care Act of 2010 it stated that the employer mandate would apply after Dec. 31, 2013.

The administration has taken "a legally shaky position," said Nicholas Bagley, a law professor at the University of Michigan who specializes in administrative and health law. "Extending the delay even to a portion of plans for a second year is pushing legal boundaries even harder."

Legal experts said, however, they could not think of anyone who would have the standing to sue. At least two lawsuits have already been filed over delays to the employer coverage requirements, one of which was dismissed in January.

The delay is the latest in a string of last-minute exemptions and extensions the Obama administration has made in rolling out the healthcare law. Monday's adjustment sparked renewed calls from congressional Republicans to postpone the so-called individual mandate, which requires most Americans to enroll in coverage by March 31 or pay a penalty in their 2014 income taxes.

HARD DEADLINE?

"Nothing in the statute justifies this ad hoc suspension and delay," said Jonathan Adler, an administrative law expert at Case Western Reserve University who has publicly criticized the healthcare law's rollout.

Unlike the individual mandate, which allows the administration to grant waivers for individuals suffering a hardship, the employer mandate has no such exemption, he said.

But the U.S. Treasury Department said in an email that the latest action was an exercise of its longstanding authority to grant transitional relief when implementing new legislation, as provided by the Internal Revenue Code.

"There certainly are arguments that this is legal," said Timothy Jost, a health law professor at Washington and Lee University.

While some courts have held that a specific deadline in a statute must be met, he said, other courts have said that a statutory deadline is just one factor to consider in determining whether a delay is reasonable.

Legal experts said, however, it would be difficult for any group or individual to show that they have the legal standing to challenge the delay in court.

"No single individual is concretely and particularly injured by the governmental action, and that's a requirement to get into federal court," said Bagley.

Adler said that while an employer with more than 99 employees that does not qualify for the latest delay could try to sue, he would face an uphill battle.

"It's always harder to claim that your misery is about somebody else being treated better than you," Adler said.

LEGAL CHALLENGES

At least two groups have already filed lawsuits against the administration's initial one-year delay of the employer mandate announced in July.

One lawsuit was filed by a conservative watchdog group, Judicial Watch, on behalf of Kawa Orthodontics, a Boca Raton, Florida-based orthodontics practice with more than 70 full-time employees. In its complaint, Kawa said it had been harmed by the delay, having spent significant time and money, including legal fees, to prepare for the employer mandate to take effect in 2014.

The U.S. district court in Florida dismissed that lawsuit on Jan. 13, finding that Kawa did not have standing because it had not suffered a "concrete injury." Kawa has appealed to the 11th Circuit Court of Appeals.

Another lawsuit is pending in federal court in Wisconsin, brought by the Association of American Physicians and Surgeons, a libertarian physicians group.

The association says most of its members have cash practices that depend on patients paying out-of-pocket for healthcare services. By enforcing the individual mandate while it delays the employer mandate, the Obama administration is shifting the insurance burden onto individuals and reducing the number of patients willing to pay cash, the group contends.

"The law says that the employer mandate must go into effect the same time as the individual mandate," said Andrew Schlafly, a lawyer for the physicians group. "Only Congress can change the law."

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