For a longer video version of the case against states creating Exchanges, see this somewhat-dated-but-still-relevant Cato video:
For a longer video version of the case against states creating Exchanges, see this somewhat-dated-but-still-relevant Cato video:
A key committee in the Michigan legislature has voted down a proposal to create one of ObamaCare’s health insurance “exchanges.” The Speaker of the Michigan House pronounced a state-run Exchange dead:
It was my hope the committee would find that a state-run exchange afforded us more control over the unacceptable over-reach by the federal government regarding the health care of Michigan citizens. After due diligence, however, it is clear that there were too many unanswered questions for the committee to feel comfortable with a state-run exchange and we will not have one in Michigan…
The committee apparently was not able to get the answers to key questions or receive assurances about major concerns regarding costs for Michigan taxpayers, the ability to adopt a model the federal government wouldn’t ultimately control or the ability to protect religious freedom for Michigan citizens. Because the committee could not be assured that a state exchange was the best way to protect Michigan’s citizens, it is understandable why they did not approve the bill.
Under the terms of ObamaCare, Michigan’s refusal to create an Exchange exempts all Michigan employers from the law’s employer mandate, which imposes penalties of up to $2,000 per worker per year.
It exempts, by my count, 429,000 Michigan residents from the law’s individual mandate – a tax of $2,085 on families of four earning as little as $24,000.
And it gives the state, those employers, and those individual residents standing to file lawsuits to stop the IRS from ignoring the clear language of the law and imposing those taxes on them anyway.
*According to PolitiFact.
In an unconscious parody of everything that’s wrong with the “fact-checker” movement in journalism, PolitiFact Georgia (a project of the Atlanta Journal-Constitution) has rated false my claim that operating an ObamaCare Exchange would violate Georgia law. (For some of the “fact-checker” genre’s
greatest worst hits, see Ben Domenech’s top 10 list.)
PolitiFact’s analysis is one-sided. It confuses opinions with facts. It was written with “no particular policy domain knowledge.” It therefore not only reaches the wrong result – it analyzes a claim I did not make and never would make.
PolitiFact began by saying that it was fact-checking the following claim, which I made in a November 9 opinion piece at National Review Online:
[O]perating an Obamacare exchange would be illegal in 14 states. Alabama, Arizona, Georgia, Idaho, Indiana, Kansas, Louisiana, Missouri, Montana, Ohio, Oklahoma, Tennessee, Utah, and Virginia have enacted either statutes or constitutional amendments (or both) forbidding state employees to participate in an essential exchange function: implementing Obamacare’s individual and employer mandates.
Lest anyone think I meant it would be illegal for the federal government to operate Exchanges in those states, the context and the text (“forbidding state employees”) of that opinion piece make it clear I was discussing whether states should establish Exchanges. Unfortunately, the context was lost on PolitiFact readers, because PolitiFact provided neither a citation nor a link to the opinion piece it was fact-checking.
In Georgia’s case, the relevant statute is that state’s version of the “Health Care Freedom Act” (GA. CODE ANN. § 31-1-11), enacted in 2010. It reads:
To preserve the freedom of citizens of this state to provide for their health care: No law or rule or regulation shall compel, directly or indirectly, any person, employer, or health care provider to participate in any health care system.
The statute defines “compel” as including “ ‘penalties or fines.”
PolitiFact notes that I cited that provision to “an Atlanta Journal-Constitution health reporter [Carrie Teegardin] via email.” Thus PolitiFact presumably had access to the rest of my November 9 email to Teegardin, in which I explained why that provision precludes Georgia from establishing an ObamaCare Exchange:
Determining eligibility for and distributing ObamaCare’s “premium assistance tax credits” is a key function of an Exchange. Those tax credits trigger penalties against employers (under the employer mandate) and residents (under the individual mandate).
Indeed, there are many ways Exchanges assist the federal government in the enforcement of those mandates. State-run Exchanges must report to the IRS on which residents have dropped their coverage and when (Section 1311(d)(4)(I)). State-run Exchanges must notify employers when one of their employees receives a tax credit (Section 1411(e)(4)(B)(iii)). That very notification triggers penalties against the employer (Section 1513/I.R.C. Section 4980H(a)). State-run Exchanges must collect all the information the federal government needs to determine eligibility for tax credits and deliver it to the federal government (Section 1401/I.R.C. Section 36B(f)(3)) – a crucial component of enforcing both the individual and employer mandates. The Secretary can require state-run Exchanges to verify that information for the federal government (Section 1411(d)), and state-run Exchanges must resolve any inconsistencies between the information provided by applicants and official records (Section 1411(e)). If a state-run Exchange can’t resolve an inconsistency between the application and the official records within a certain time period, it has to notify residents that they will be penalized under the individual mandate (Section 1411(e)(4)(B)(iv)). State-run Exchanges must maintain an appeals process for individuals and employers who believe they were wrongly assessed penalties (Section 1411(f)).
My email to Teegardin continued:
Ergo, if Georgia establishes an Exchange, then a Georgia law and state employees would be indirectly compelling employers and residents to participate in a health care system.
In other words, the activities required of an ObamaCare Exchange are exactly the sorts of things that the Health Care Freedom Acts in Georgia and 13 other states exist to prohibit those states’ employees from doing. In a November 15 opinion piece Atlanta Journal-Constitution, no less, I reiterated that same point: legislatures and voters in those 14 states have enacted state laws that make it illegal (and in some cases unconstitutional) for state employees to operate an ObamaCare Exchange.
Rather than evaluate that claim, PolitiFact asked a handful of Georgia scholars about something completely different: whether Georgia’s Health Care Freedom Act prevents the federal government from creating an Exchange for Georgia, or otherwise trumps federal law. It’s difficult to see how anyone who had read my two opinion pieces, much less my email to Teegardin, could think I was saying anything of the sort. Of course such a claim would be false; that’s why I never made it. (ObamaCare does itself give each state the power to stop the federal government from running an Exchange within its borders. But that’s a topic for another day.)
Then again, I could have set them straight. PolitiFact contacted me for help with this “fact-check.” I politely refused, citing my ongoing boycott of their organization. One might say my refusal to assist with this “fact-check” means I have no right to complain.
Another way of looking at it is that this episode validates my boycott. Consider how they responded to my refusal to help: Cannon won’t speak to us because he says we’re not reputable. Should we try to find someone else who might argue his side? Nah. PolitiFact could have proven me wrong by conducting a thorough analysis. Off the top of my head, I can think of seven other experts they might have consulted. A simple online search would have produced two attorneys who have threatened to sue the State of Arizona under the Health Care Freedom Amendment to its Constitution if state officials establish an Exchange. Instead, PolitiFact considered a discussion of my email auto-signature – “Tyrannis delenda est” – more worthy of inclusion in their “fact-check” than another expert who would take up my side.
My boycott of PolitiFact hasn’t succeeded in bringing about the desired behavior change. But if they keep this up, I don’t see how I can fail.
Jonathan Adler and I have a paper titled, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” Our central claims are:
No sentient being following the health care debate could argue, in good faith, that Obamacare’s architects intended for the federal government to set up exchanges without subsidies. It would completely subvert the law’s intent.
It appears my friend does not know the statute, the legislative history, or what Congress’ intent was.
Cohn writes that the statute is “a little fuzzy” on this issue. Quite the contrary: the statute is crystal clear. It explicitly and laboriously restricts tax credits to those who buy health insurance in Exchanges “established by the State under section 1311.” There is no parallel language – none whatsoever – granting eligibility through Exchanges established by the federal government (section 1321). The tax-credit eligibility rules are so tightly worded, they seem designed to prevent precisely what the IRS is trying to do.
ObamaCare supporters just know that can’t be right. It must have been an oversight. Congress could not have written the law that way. It doesn’t make any sense. Those provisions must take effect in federal Exchanges for the law to work. Why would Congress give states the power to blow the whole thing up??
The answer is that Congress didn’t have any choice. Congress intended for ObamaCare to work this way because this was the only way that ObamaCare could become law.
A law limiting tax credits to state-created Exchanges, therefore, is exactly what Congress intended, because Congress had no other choice. On the day Scott Brown took office, any and all other approaches to Exchanges ceased to embody congressional intent. If Congress had intended for some other approach to become law, there would be no law. What made it all palatable was that it never occurred to ObamaCare supporters that states would refuse to comply. The New York Times reports, “Mr. Obama and lawmakers assumed that every state would set up its own exchange.”
The only preposterous parts of this debate are the legal theories that the IRS and its defenders have offered to support the Obama administration’s unlawful attempt to create entitlements and impose taxes that Congress clearly and intentionally did not authorize. (But don’t take my word for it. Read the statute. Read our paper. Read this, and this. Watch this video and our debate with Jost. Click on our links to all the stuff the IRS and Treasury and Jost have written.) I wonder if Cohn would tolerate such lawlessness from a Republican administration.
Cohn further claims the many states that are refusing to create Exchanges are “totally sticking it to their own citizens” and people who encourage them “are essentially calling upon states to block their citizens from receiving federal tax breaks, worth as much as several thousand dollars per person. Aren’t conservatives and libertarians supposed to be the party that likes giving tax money back to the people?” Seriously?
Who’s for tax cuts now?
Here’s what I think is really bothering Cohn and other ObamaCare supporters. The purpose of those credits and subsidies is to shift the cost of ObamaCare’s community-rating price controls and individual mandate to taxpayers, so that consumers don’t notice them. When states prevent such cost-shifting, they’re not increasing the cost of ObamaCare – they’re revealing it.
And that’s what worries Cohn. If the full cost of ObamaCare appears in people’s health insurance premiums, people will rise up and demand that Congress get rid of it. Cohn isn’t worried about states “sticking it to their citizens.” He’s worried about states sticking it to ObamaCare.
The title of Cohn’s blog post is, “Obamacare’s Critics Refuse to Give Up.” At least we can agree on that much.
Unconfirmed reports indicate Ohio officials are considering implementation of an ObamaCare health insurance “exchange.” That would be very interesting if true, because operating an ObamaCare exchange would violate the state’s constitution.
No federal, state, or local law or rule shall compel, directly or indirectly, any person, employer, or health care provider to participate in a health care system…
“Compel” includes the levying of penalties or fines.
In order to operate an exchange, Ohio employees would have to determine eligibility for ObamaCare’s “premium assistance tax credits.” Those tax credits trigger penalties against employers (under the employer mandate) and residents (under the individual mandate). In addition, Ohio employees would have to determine whether employers’ health benefits are “affordable.” A negative determination results in fines against the employer. These are key functions of an exchange.
Ergo, if Ohio passes a law establishing an exchange, then that law would violate the state’s constitution by indirectly compelling employers and individual residents to participate in a health care system. That sort of law seems precisely what Section 21 exists to prevent.
As I explain in a recent column, 13 other states have passed statutes or constitutional amendments (Alabama, Arizona, Georgia, Idaho, Indiana, Kansas, Louisiana, Missouri, Montana, Oklahoma, Tennessee, Utah, and Virginia) that bar state employees from carrying out these essential functions of an ObamaCare exchange.
Oklahoma Attorney General Scott Pruitt has filed a lawsuit challenging the Internal Revenue Service’s unlawful attempt to impose ObamaCare’s taxes on exempt employers and individuals. (Jonathan Adler and I plumb this issue in our forthcoming Health Matrix article, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.”)
An article in the current issue of Business Insurance cites a couple of experts on the potential impact of the lawsuit:
While the ramifications of the suit pending in the U.S. District Court in Muskogee, Okla., are huge, the challenge brought last month has gotten little attention…
What is clear is that the outcome of the lawsuit could be crucial for the future of the health care reform law, observers said.
If premium subsidies are not available in federally established exchanges, “No one would go to those exchanges. The whole structure created by the health care reform law starts to fall apart,” said Gretchen Young, senior vice president-health policy at the ERISA Industry Committee in Washington.
“The health care reform law would become a meaningless law,” added Chantel Sheaks, a principal with Buck Consultants L.L.C. in Washington.
Roll Call reports that if President Obama wins re-election, House and Senate Republicans will hold votes on rescinding his illegal IRS rule that unlawfully taxes employers and individuals in the 30 or so states that do not create their own health insurance exchanges:
House Republicans are opening a new front in their drive to derail the 2010 health care overhaul, using an expedited legislative procedure to upend targeted parts of the law…
Republican leaders are preparing to launch the effort during the post-election session that begins Nov. 13.
The resolution backed by Rep. Darrell Issa, the California Republican who heads the Oversight and Government Reform Committee, and Rep. Scott DesJarlais, a Tennessee Republican and the measure’s chief sponsor, is meant to nullify the upcoming IRS rule authorizing the distribution of subsidies through tax credits in every state, even the 35 that have not yet established state health care exchanges…
House leaders plan to bring the resolution to a vote during the lame-duck session if Obama wins re-election but will lay the groundwork for using the budget reconciliation process to strike parts of the law instead if former Massachusetts Gov. Mitt Romney wins, Republican aides said.
The resolution aimed at the IRS rule is the first in a series of Republican initiatives intended to block parts of heath care law if Obama is given a second term, a senior Senate Republican aide said.
“If Obama wins, you will see more of them. If Romney wins, you will see fewer,” said the Senate Republican aide, who added that even if such resolutions ultimately fail, they could require Democrats to cast votes that could pose re-election problems in 2014.
I don’t see why they wouldn’t hold the vote regardless of the outcome of the election. President RomneyCare would probably need some reminding that his own party is serious about repealing ObamaCare.
Jonathan Adler and I first called attention to the IRS’s ploy here, and we’ve been hammering away at it here, here, here, here, here, and here. If you really want to nerd out, read our forthcoming Health Matrix article, ”Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” Oklahoma’s attorney general has filed a lawsuit challenging the IRS’s illegal ObamaCare taxes.
John Goodman says stopping the IRS’s illegal ObamaCare taxes could deal “a fatal blow to ObamaCare.”
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