Lawsuit claims Obamacare crushing small employers

Tim Cavanaugh Contributor
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The 2010 Patient Protection and Affordable Care Act radically hikes small-business costs, impoverishes states and violates the plain language of the U.S. Constitution, claims a lawsuit filed Tuesday in Houston, Texas.

Steven F. Hotze, a Katy-based allergist and immunologist, says the Affordable Care Act, popularly called Obamacare, forces his wellness center to pay enormous costs for its 73 employees. His suit challenges the law on three main grounds.

Hotze’s lawsuit claims that by forcing Americans to buy private insurance, Obamacare violates the Fifth Amendment’s Takings Clause, which holds that private property can only be taken for a “public use” and with just compensation for the property owner.

The suit also claims that the Affordable Care Act is unconstitutional because revenue-raising laws and taxes must originate in the House of Representatives. In the 5-4 decision upholding Obamacare, Chief Justice John Roberts ruled that the law’s penalty on the uninsured is a tax.

A 2012 suit filed in federal district court that was supported by the Pacific Legal Foundation similarly uses the Origination Clause in Article I, Section 7 of the Constitution to challenge the Affordable Care Act’s legality. The Justice Department has moved to dismiss that challenge, arguing that the Supreme Court “has never invalidated an act of Congress” using the clause.

Hotze also argues that Obamacare violates principles of federalism by sending a “massive redistribution of wealth away from Texas.”

Although Hotze is critical of federal intrusions, his small wellness and pharmaceutical center does not seem like a typical plaintiff in a suit against the federal government. “It’s primarily a women-run business,” he told The Daily Caller, that specializes in natural and diet remedies without extensive use of pharmaceuticals.

The problem, said Hotze, is that the Affordable Care Act is forcing his small business to choose between either exorbitant per-employee penalties or exorbitant costs for health coverage the employees don’t want.

Right now Hotze and his employees rely on health savings accounts, but Obamacare would require them to move into government-approved plans with higher premiums and fewer options.

This requirement will kick in January 1, 2014, forcing Hotze’s company, Braidwood Management, either to switch its employee plan or pay penalties of $2,000 per person for every employee over a 30-employee threshold.

Braidwood is hardly alone in facing what Hotze’s lawsuit, quoting recent comments by Democratic Sen. Max Baucus, calls the Obamacare “train wreck.”

Hotze explained: “This is going to have an effect on my bottom line. I’ll have to absorb a dramatic increase in insurance costs. And there are many companies in Texas in the same position, many of which not doing as well as others in terms of profit. They’re going to have to discontinue health care for their employees because it will be cheaper to pay the $2,000 per employee.

“So the employees will now have to go out and get insurance,” Hotze continued. “And the price of private insurance is doubling. Many individuals will just say it’s cheaper to pay the penalty. You’re going to see a drop in the number of people who have health coverage. So it’s upside down, despite the claims of Obama and the liberal Democrats that this was going to bring down costs and get more people covered.”

The suit names Secretary of Health & Human Services Kathleen Sebelius and Treasury Secretary Jacob J. Lew as defendants.

Hotze’s is not the only suit in which small businesses owners are challenging the Affordable Care Act. Last week, a group of businesses in six states filed a suit supported by the Competitive Enterprise Institute, arguing that the Internal Revenue Service is illegally implementing Obamacare in states that have opted not to establish state-run insurance exchanges.

Timothy Sandefur, who is arguing the Pacific Legal Foundation’s case Sissel v. Department of Health and Human Services, told The Daily Caller that this proliferation of Obamacare lawsuits is a positive development.

The Origination Clause challenge, which Hotze’s case shares with the Sissel lawsuit, is not as much of an outside chance as the government claims, Sandefur said.

“The Supreme Court had also never struck down a law under the spending clause until it did so last June in [striking down a part of] Obamacare,” he told TheDC. “And the federal government has also never before passed a law forcing all Americans to buy a specific private product. So we’re in a lot of areas we’ve never been in before. The Supreme Court has made clear that it will enforce the Origination Clause.”

On the other hand, the Fifth Amendment Takings Clause argument “seems like a bit of a stretch to me,” Sandefur said. “This court has shown that it is not prepared to enforce property rights with regard to seizing private homes and giving them to private developers [in the 2005 Kelo v. New London decision].”

Sandefur was more optimistic on the suit’s federalism claims. “There’s a lot to be said for the federalism implications of Obamacare,” he said. “This law clearly intrudes the federal government into realms that were formerly reserved to the states. The more the federal government grows and takes tax money from citizens, the more it will be taking money away from states.”