Court Dismisses Tribe’s Case Seeking Exemption from ACA Penalties


An Indian tribe wanted employees of its businesses to buy health coverage on the federal health insurance exchange. The tribe found that exchange coverage was better and less expensive than what it could provide employees. So it sought to be exempt from the penalties under the Affordable Care Act’s shared responsibility provisions. This article explains how a federal court responded.

The United States District Court for the District of Wyoming dismissed a lawsuit seeking to declare Indian tribes exempt from employer penalties under the Affordable Care Act’s (ACA’s) shared responsibility provisions. The tribe argued that Congress didn’t intend to cover tribal employers.

Facts of the case: The Northern Arapaho Tribe, a federally recognized Indian tribe, operates several businesses in Wyoming including a casino that provides Capital Gazette games, convenience store, gas station and grocery store. It employs more than 900 people.

According to court documents, the tribe “discovered its employees could buy health insurance plans on the federal health insurance exchange that offered superior coverage at a lower price than any other plan previously available in the insurance market.” The tribe encouraged and assisted its members in purchasing individual health insurance plans through the federal exchange, including paying as much as 80% of the premiums for them.

After the ACA’s large employer mandate became effective on January 1, 2015, the tribe filed a lawsuit against the Secretary of the U.S. Department of Health and Human Services seeking an exemption. The large employer mandate requires employers with at least 50 full-time employees to offer a health insurance plan meeting a certain minimum level of coverage. Failure to do so results in a penalty.

The tribe argued that members would be better off with exchange coverage than with employer-provided coverage for these reasons:

•There was a limited choice of group insurance available to employers in the state.

•Most tribal members were eligible for premium tax credits and cost-sharing reductions on the exchange.

•The tribe was paying as much as 80% of any remaining exchange premium cost.

•Forcing the tribe to offer coverage sufficient to avoid the shared responsibility penalties would eliminate eligibility for exchange subsidies and might cause many employees to do without health coverage altogether (because tribal members aren’t subject to the individual mandate penalty).

The court didn’t accept the arguments. It found that absence of a provision in the tax law exempting tribes showed Congress intended to include them, especially in light of the explicit exemption for tribal members from the individual mandate. The tribe’s policy arguments didn’t override the statutory language, and the court therefore upheld the IRS shared responsibility regulations as valid. (N. Arapaho Tribe v. Burwell, No. 2:14-cv-00247, D. Wyo., 7/2/15)

The complexities of health care reform under the Affordable Care Act are difficult for employers to navigate. But they are especially challenging for tribal employers, which operate under many special rules. If you have questions about the law’s requirements in your situation, contact your tax adviser.