This Could Be a Fatal Blow to ObamaCare

The Affordable Care Act makes tax subsidies available to people who obtain health insurance through health insurance exchanges, e.g., requiring families up to 138% of poverty to pay no more than 2% of their income for coverage that could cost half what they earn, or more. It does not provide for subsidies in federally operated exchanges, however. When Michael Cannon and Jonathan Adler first pointed this out, I assumed it was a drafting error. Apparently the IRS is assuming that as well. But now the Cato scholars have produced evidence that the omission was intentional. (See also, Health Affairs Blog.) With so many states declining to set up exchanges, ObamaCare will be a disastrous failure if the courts agree with them:

An Internal Revenue Service (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. 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 employers, the IRS rule is likely to be challenged in court.

Comments (7)

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  1. Ken says:

    Can’t wait for the fatal blow.

  2. Alex says:

    That’s really horrible, actually.

  3. Otis says:

    Seems to me that there might be some kind of a legislative effort to fix the act. They might wait until it blows up.

  4. Steve says:

    More fatal blows to Obamacare are needed.

  5. Strickland Bright says:

    I heard about this forever ago, but the news hype died down when it was determined that it would be no hurdle at all for the Obama administration to paint it as an accidental omission and nothing more. Has this changed?

  6. Tim says:

    Very intriguing.

  7. Greg Scandlen says:

    Sorry to be late to the party, but the Cannon/Adler argument in Health Affairs (link posted above) is simply brilliant. They make Timothy Jost look foolish, especially by declining to question his motives, as Jost does to them. Congratulations, gentlemen.