Indiana Attorney General, Districts Sue Over Federal Health-Care Law

Senior Editor

Indiana’s state attorney general and 15 school districts are suing the federal government over the 2010 health-care law, saying the measure is forcing schools to choose between absorbing major costs and reducing employees’ hours.

The lawsuit, filed by individual school systems and state Attorney General Greg Zoeller, specifically contends that regulations approved by the Internal Revenue Service that clarify how the law will be administered unfairly penalizes the state and districts for not offering health insurance to various employees, including support staff working in schools.

The state and districts argue that the IRS’ policy would force Indiana and its districts to extend health-care coverage beyond what Congress had authorized through the law, which was championed by President Obama and has proved to be one of the most divisive policies on the hyper-partisan political landscape today.

Indiana was one of many states that did not create a state health-insurance exchange through the law, commonly called the Affordable Care Act. But the plaintiffs say that the IRS regulation would improperly apply financial penalties to employers, including school districts, in states that don’t have exchanges and don’t provide health care to employees working at least 30 hours a week. School districts are cutting hours of employees to avoid the penalties that would come with the law and the IRS regulation, the plaintiffs say.

The IRS regulation “thwarts Indiana’s ability to execute state policy sparing employers from employer mandate penalties,” the lawsuit argues, and it “induces plaintiffs to reduce the hours of certain employees, including part-time and intermittent employees, to avoid having to provide all such employees with minimum essential coverage.” 

Zoeller, an elected Republican, said in a statement that the lawsuit “is about the fundamental relationships between the state and federal government.”

The lawsuit, filed in the U.S. District Court of the Southern District of Indiana, a federal court, names both the Treasury Department, of which the IRS is a part, and the U.S. Department of Health and Human Services, as defendants.

The legal action cites several instances of the districts named in the suit cutting the hours of their staff, including instructional aides and cafeteria workers, to less than 30 hours a week, so that they do not face the employer mandate.

One such district that has made cuts, according to the plaintiffs, is the Eastern Hancock County school corporation. The Indiana district has just under 200 employees and has reduced hours of support staff, including instructional sides, to fewer than 30 hours a week so that those workers are considered part-time employees, not full time who are eligible to receive health benefits under the law.

Jim Hamilton, a lawyer representing the districts, said the support staff in question affected by the law will vary by district, but include employees offering assistance in classroom, bus drivers, and others. Indiana schools typically do not offer those employees health insurance coverage because they don’t have the money to do so, Hamilton told Education Week. The legal action does not focus on teachers, who in Indiana are covered by collective-bargaining agreements that obligate districts to provide health coverage, he said.

For Indiana districts, offering support staff coverage “has a cost, and that means cuts in other places,” said Hamilton, adding that many of the state’s schools have been squeezed for years.

Encouraging districts to reduce staff members’ hours ultimately hurts “good people who don’t make a lot of money,” the lawyer added.

But state Rep. Ed DeLaney, an Indianapolis Democrat, questioned the motives behind the lawsuit, and said state Republicans’ efforts to derail the law are denying school employees and others vital services.

“This lawsuit confirms the desire of our state’s Republican leadership to deny affordable health care coverage to hundreds of thousands of Hoosiers and takes that to dangerous new levels,” DeLaney said in a statement.

“This lawsuit deserves to be tossed out of court as quickly as humanly possible,” he added. “Some day, there will need to be an accounting for the willful neglect demonstrated by the leaders of this state’s government toward the basic human need for health care.”

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