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Next Battle: Health Insurance Exchange Rules


Next Battle: Health Insurance Exchange Rules

© Getty Images

© Getty Images

Starting in 2014, the PPACA requires most Americans to have health insurance with subsidies available to help many people pay for insurance bought through markets known as insurance exchanges.

A dogfight is looming on whether the subsidies will be available in exchanges set up and run by the federal government in states that fail or refuse to establish their own exchanges. This could occur in a few states or as many as 26 that filed suit questioning the PPACA's constitutionality.

Critics say the law allows subsidies only for people who obtain coverage through state-run exchanges. The White House says the law can be read to allow subsidies for people who get coverage in federal exchanges as well.

The dispute has huge practical implications. The Congressional Budget Office predicts that 23 million uninsured people will gain coverage through exchanges and that all but five million of them will qualify for subsidies, averaging more than $6,000 a year per person. Subsidies, in the form of tax credits, will be available to people with incomes from the poverty level up to four times that amount ($23,050 for an individual to $92,200 for a family of four).

Some supporters of the law say Congress may have made a mistake in drafting this section. But, they add, the intent of Congress is clear: subsidies should be available in federal as well as state exchanges.

The law says that subsidies will be provided to residents of a state to help defray the cost of health plans offered “through an exchange established by the state.”

A subsequent rule issued by the Obama administration for clarification allows tax credits for insurance bought in either a state or a federal exchange.

Of course the health care brawl is far from over as it continues this week on Capitol Hill. The House plans to vote on a Republican measure to repeal the 2010 health care law, Mr. Obama’s most significant legislative achievement. Democrats, who control the Senate, say repeal efforts have no chance of success there.

Representative Phil Roe, Republican of Tennessee, said the rule on premium subsidies “contradicts the explicit statutory language” of the Patient Protection and Affordable Care Act. Mr. Roe and another Tennessee Republican, Scott DesJarlais, have introduced a bill to nullify the rule, issued by the Internal Revenue Service.

Douglas H. Shulman, the I.R.S. commissioner, defended the rule as consistent with the intent of Congress. "The statute," he said, "includes language that indicates that individuals are eligible for tax credits whether they are enrolled through a state-based exchange or a federally facilitated exchange."

However, Senator Orrin G. Hatch of Utah, the senior Republican on the Senate Finance Committee, said the Obama administration was usurping the role of Congress and rewriting the law to provide tax credits through federal exchanges.

James F. Blumstein, a professor of constitutional and health law at Vanderbilt University, told the New York Times the dispute over subsidies involved a serious legal issue.

"The language of the statute is explicit," Mr. Blumstein said. "Subsidies accrue to people who obtain coverage through state-run exchanges. The I.R.S. tries to get around that by providing subsidies for all insurance exchanges. That interpretation will almost certainly be challenged by someone."

The most likely challenger, Mr. Blumstein said, is an employer penalized because one or more of its employees receive subsidies through a federal exchange. Employers may be subject to financial penalties if they offer no coverage or inadequate coverage and at least one of their full-time employees receives subsidies.


While the intent of the PPACA clearly was to have subsidies available in all exchanges, federal and state, the law explicitly only provides them in state exchanges. I'm not an attorney and I don't know whether the intent trumps actually language. But in the end this dogfight and the result could not be important to the future success or failue of the PPACA.

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