The ObamaCare Meltdown Begins

irsWhile Americans remain focused on the IRS’s targeting of conservative groups applying for tax exempt status, two recently filed lawsuits reveal a far deeper level of alleged corruption at the agency. On May 2, a group of small businesses challenged the IRS’s attempt to illegally implement health insurance subsidies contained in the Affordable Healthcare Act, aka ObamaCare. On May 14, it was revealed that a class action suit has been filed by a California-based HMO, accusing the IRS of stealing 60 million medical records belonging to 10 million Americans.

The small business group’s suit, filed in the U.S. District Court for the District of Columbia, is the direct result of the Supreme Court’s decision that the part of the healthcare bill requiring Americans to purchase health insurance was constitutional. At the same time, the Court ruled that the federal government could not require states to set up the state-run exchanges necessary to facilitate the purchase of such insurance. As a result, 27 states have opted not to set up exchanges, forcing the federal government to fill the vacuum.

The employer mandate contained ObamaCare requires businesses to offer health insurance to employees, if they have at least 50 full time employees, defined as anyone working 30 or more hours per week. The law also provides IRS-implemented subsidies to help low-income people purchase insurance through the exchanges “established by the state.” If a company doesn’t offer its uninsured workers a policy and those workers end up getting a subsidy, the company will have to pay a fine.

The rub is the aforementioned phrase “established by the state.” The business group contends the subsidy can only be administered in states where the state itself has established the insurance exchange. They contend the IRS is ignoring the law’s constitutional limitations and illegally setting up subsidies in every state, forcing the employers to adhere to the law’s mandates. The IRS’s lawyers contend the language of the statute allows them to set up subsidies regardless of who is running the exchanges.

It appears the IRS is running roughshod over the rule of law, a reality pointed out in a paper written by Jonathan Adler and Michael Cannon last July, in which they anticipated lawsuits being filed in this regard. They noted that an IRS rule “purports to extend these tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own,” they wrote. “This rule lacks statutory authority. The text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges. The IRS rule is contrary to congressional intent and cannot be justified on other legal grounds. Because the granting of tax credits can trigger the imposition of fines on millions of individuals and employers, the IRS rule is likely to be challenged in court.”

It is worse than that. As the Washington Post’s Michael Gerson explains, the IRS “seized the authority to spend about $800 billion over 10 years on benefits that were not authorized by Congress.” By law, only Congress can authorize such spending. Michael Cannon notes the political implications. “It doesn’t look good from the road when IRS employees violate the clear language of federal law in a matter that just happens to rescue the top domestic policy achievement of their boss, the president,” he contends. Sam Kazman, general counsel of the Competitive Enterprise Institute, which is coordinating the lawsuit, echoed that sentiment. “ObamaCare is already an incredibly massive program,” he said. “For the IRS to expand it even more, without congressional authorization and in a manner aimed at undercutting state choice, is flagrantly illegal.”

“Flagrantly illegal” is a phrase that provides an apt segue to lawsuit number two. Last month in San Diego, attorney Robert E. Barnes, representing an unnamed firm identified in court records as the “John Doe Company” filed a suit alleging that 15 IRS agents illegally seized the medical records of 10 million Americans. Among those targeted were “every state judge in California, every state court employee in California, leading and politically controversial members of the Screen Actors Guild and the Directors Guild, and prominent citizens in the world of entertainment, business and government, from all walks of life.”

The alleged abuses are shocking. “No search warrant authorized the seizure of these records; no subpoena authorized the seizure of these records; none of the 10,000,000 Americans were under any kind of known criminal or civil investigation and their medical records had no relevance whatsoever to the IRS search,” the suit contends.

The John Doe Company is actually a Health Insurance Portability and Accountability Act (HIPAA) “secure facility,” meaning that it maintains sensitive data on patients that require security measures to be followed. The data include files on psychological counseling, gynecological counseling, sexual and drug treatment, as well as other sensitive medical treatment information.

None of it mattered to the IRS agents. “Despite knowing that these medical records were not within the scope of the warrant, defendants threatened to ‘rip’ the servers containing the medical data out of the building if IT personnel would not voluntarily hand them over,” the complaint reads. “Moreover, even though defendants knew that the records they were seizing were not included within the scope of the search warrant, the defendants nonetheless searched and seized the records without making any attempt to segregate the files from those that could possibly be related to the search warrant. In fact, no effort was made at all to even try maintaining the illusion of legitimacy and legality.”

According to the suit, the IRS had a search warrant authorizing the seizure “of financial records related principally to a former employee of the company.” Yet IRS agents not only seized the medical records, but “personal mobile phones, including all the data and information on those phones, without any employing the proper and procedurally correct screening methods to protect private and privileged information, all of which was completely unapproved by the search warrant.”

The theft of data is so large it affects “roughly one out of every twenty-five adult American citizens,” the complaint states. It further notes that the IRS refuses to reveal which agents participated in the seizure, who saw the records, or where they are currently located. Almost unbelievably, the suit alleges that after the raid was complete, the IRS agents used the company’s media system to watch the NCAA basketball tournament, even as they ordered soft drinks and pizza.

The complaint seeks $25,000 in compensatory damages “per violation per individual,” plus punitive damages for constitutional violations.

Unsurprisingly, Republicans see an opportunity to tie the healthcare bill to IRS corruption along with Democrats running in the 2014 election. Yesterday, Senate Minority Leader Mitch McConnell (R-KY) released an ad linking the president to the IRS scandal. Sen. Marco Rubio (R-FL) posted a YouTube video reminding Americans of the IRS’s ties to ObamaCare. “Now as far as the IRS’s role in Obamacare, well that’s chilling,” Rubio says in the video. “Because if you notice, the IRS is deeply involved in implementing Obamacare. They’re on the front lines of it.”

Rubio may be understating the case. When the healthcare bill is fully rolled out next year, it will require 2,137 IRS agents to implement and police its requirements. Moreover, a recent report by the Treasury Inspector General for Tax Administration reveals that the tax provisions included in ObamaCare “represent the largest set of tax law changes the IRS has had to implement in more than 20 years.”

Thus, as far as Republicans are concerned, the IRS is the gift that keeps on giving. Yesterday, it gave them even more political ammunition. The American Center for Law and Justice (ACLJ) filed a lawsuit on behalf of 25 Tea Party and other conservative organizations, alleging they were unfairly targeted by the IRS with regard to obtaining tax-exempet status. Top agency officials, as well as U.S. Attorney General Eric Holder and Treasury Secretary Jack Lew have been named as defendants. ACLJ contends that these officials violated the First and Fifth Amendments of the Constitution, the Administrative Procedure Act, and the IRS’s own rules and regulations. “The IRS and the federal government are not going to get away with this unlawful targeting of conservative groups,” said ACLJ Chief Council Jay Sekulow. “As this unconstitutional scheme continues even today, the only way to stop this flagrant and arrogant abuse of our clients’ rights is to file a federal lawsuit, which we have done.”

Americans haven’t needed much of a push to despise the IRS or ObamaCare–and that was before these ongoing revelations burst onto the national scene. Perhaps, as more of them unfold, the nation will finally reach a tipping point best expressed by former president Gerald R. Ford: “A government big enough to give you everything you want is a government big enough to take from you everything you have.”

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  • truebearing

    In other words, Obamacare is ushering in the totalitarian control it was designed for and the IRS is playing its jackbooted role as expected.

    People in this country desperately need to recognize that what Obamacare and the IRS are doing isn't the result of incompetence or mistakes, though there is plenty of both. It is a deliberate strategy to take control of the nation's single biggest industry and use it to leverage more socialistic control of all industry. It is the crown jewel of the Obama-Soros incremental coup that started the day Obama was elected.

    • Spider

      Exactly !

    • megapotamus

      Progessivism progresses. Like the shark it must swim and grow or die. Finally though the shark outgrows its fodder. That is what is happening to the Leviathan state now. It devours whatever it sees but still goes hungry. The RINO squad led by McCain is a full partner in this. Very few in office are not.

  • @stanthedog

    Facist bastards. Fire all of them.

    • gee59

      We need to go way beyond merely firing them – they have broken numerous laws. These actions are criminal – they need to be arrested – everybody that ordered them to do this also goes under the RICO Act.

  • pinnie99

    Yup…Fire them all… Arrest some. Flat tax time…put an end to slavery.

  • davarino

    Its amazing to me how easy it is to coopt citizens to oppress their own countrymen. And the left always accuse the right of being fascists. Thats obviously projection.

    You fascists remember what happened to the Vichy in France once WWII was over? Enjoy your freedom in the sun

    • bshade

      It is amazing the US citizens would and have turned on fellow US citizens, and very easily.

  • onecornpone

    Despite knowing that these medical records were not within the scope of the warrant, defendants threatened to 'rip' the servers containing the medical data out of the building…

    The IRS thugocracy is only in it's infancy… We're all Chicagoians now!?!

    Power corrupts, absolute power corrupts absolutely.

    • jacob

      What the situation boils down to, is that in a dictatorship, the dictator gets used to dictate and
      the people get used to obey….

      Classic example is that of "president" CASTRO of Cuba….

      53 years as "president" and counting….

      By the way. weren't there talks of reelecting OBAMBA for a third term…???????

  • Looking4Sanity

    "Now is the time to move to ABOLISH the IRS!" – Mark Levin

    • 4_Constitution

      Amen! If the former USSR can have a flat tax, why can't we?!

      Check this out. Here is the starting game plan for 2014. 20 of the 33 Senate seats that are up for grabs are Democrats who are vulnerable b/c many of them are in Red states.

      Hopefully, we can get rid of that dipsh*t Mark Warner next year!

      • Looking4Sanity

        I'll be voting against him…as usual.

        • 4_Constitution

          I wonder what Obama has up his sleeve for next year's election? It's going to be nastier than last year, that's for sure.

          • Looking4Sanity

            Whatever the Dims are cooking up, you can bet the Lame stream media will sweep it under the rug.

          • 4_Constitution

            LOL…I even broke up the word Soc*alist. Let's see if it goes through for the third time.

          • 4_Constitution

            What I meant to say is that our UE looks exactly like Soc*alist Europe.

          • Mary Sue

            Soc*alism is a bad word! XD

          • Looking4Sanity

            It's just one of those hoops we all must jump through.

          • 4_Constitution

            Yep. The Media will blame the private sector for when insurance rates go up instead of blaming Obamacare.

            Where my mom works, they already put workers under 30 hours and the new hires are coming in through a temp agency. Welcome to a nation of part-timers.

          • Looking4Sanity

            I never liked temp agencies from day one. They are exploitive and undermine the dignity and value of working class Americans. They should be outlawed.

          • 4_Constitution


            My mom is gonna retired this year at 62 and she is mad as hell that she is retiring to reduced Medicare benefits. She said she's not waiting until she's 67 b/c SS and MC won't be there in five years.

          • Looking4Sanity

            It won't be if we don't act…and act SOON. Odds are that that isn't going to happen, so your mom is smart to lock in now. That might give her some temporary protection.

  • watsa46

    Is this blackmail of citizen?

  • BLJ

    The IRS needs to be eliminated. One good way is go with a simple flat tax system. Then go after the UN.

  • Softly Bob

    Oh come on……… Surely you now have enough to IMPEACH, ARREST and CONVICT Obama and all his henchmen, cronies and accomplices!

  • lambsev77

    Washington DC has become a free-for-all for anyone connected to the Jesuits and/or the Freemasons and/or Islam.

  • greenzizzle

    This was always going to happen , he thought it would work , well it didn't

  • gee59

    Just a few months ago I did not believe it necessary for an armed revolt against our own government. The Odumba administration is changing my mind

  • pyeatte

    So America has it's own Gestapo Agency masquerading as the IRS…who would have thought. This is going to be one heck of a swamp to drain.

  • Edward Cox

    Consider Obamacare a gift from the Democratic Party. Along with a 17 trillion national debt, record numbers on food stamps etc. Too bad the American people were too busy watching football games to pay attention.

    • Mary Sue

      yeah. If they actually wanted to "improve" health care, they'd have copied the Canada Health Act word for word. But they didn't.

  • CurmudgyOneJr

    The quote at the end of the article, attributed to Ford, is usually attributed to Thomas Jefferson. Also frequently misattributed to Ronal Reagan.

  • megapotamus

    Is this all 'flagrantly illegal'? Sadly it is far from clear. Roberts thrust his shiv in deeply. If the mandate can be construed as a legal tax what cannot be ruled Constitutional? Nearly nothing, friends. Nearly nothing exists beyond federal intervention. The private sphere no longer exists. But this is the boost phase of a journey we have been on since FDR. You see, the old 'reactionaries' of that day were quite, quite right. Federal support programs, including in medicine and disability, are ALL Unconstitutional. Every one. Every farm bill, every appropriation, every grant, every loan, every damn thing that reaches beyond the courts/jails, defense and very little else is and always has been against our most vital and sacred law. Until this is the view of more than the tiny minority, even among conservative activists, that hold it no durable improvement in any regard can be expected.

    • Mary Sue

      either that or what Roberts did backfired on him hugely. But time will tell…

  • Flowerknife_us

    Your "personalized" health care policy will be written based upon your "personal" Medical history. So of course Uncle Obama needs to have your Medical Records. How else will they know how to charge you?
    One could guess that there will be a rate configured for every behavior Humans have. With everyone being charged by their habits.

    However, Uncle Obama will still decide if you get repaired having paid forward for it or not.

    A Newborn will be given a rate before it even is self aware-Gene code risk.

    What is the rate for a 5 year old who roller skates?

    Will an overweight welfare recipient be denied food stamps if refusing to go to Fat Camp?

    The politically correct crowd has been Protecting Fat people from ridicule for decades now. But the Government is going to pick on that class of people in wholesale numbers in some 9 Months???

    If genetics makes you Fat, then what???

  • Doggwood

    I think we should give Obamacare a chance. Just because the IRS uses its power to deprive the ruling party's political opposition of money while facilitating the flow of dollars into the pockets of its allies doesn't mean the IRS will use its power to deprive the ruling party's political opposition of health care while facilitating access to medical resources by its allies. I mean, just because your death is good for Obama because you'll stop voting and the death tax can seize your savings doesn't mean Obama won't give you the same level of service as he'll deliver to his cronies. What sort of paranoid mind could suggest that Obama doesn't support equal treatment under the law? Anyone who thinks that should have their taxes audited and their health care cut to the bone!