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:
Supporters of the law scoff at the arguments…
But, confident of their case, some health law opponents, including Jonathan Adler of Case Western Reserve Law School, Michael Cannon of the libertarian Cato Institute and National Affairs editor Yuval Levin, are urging Republican-led governments to refuse to set up the online insurance purchasing exchanges, which would, as the argument goes, make their residents ineligible for the tax credits and subsidies. They say that this step also would gut the so-called employer mandate, which the law says will take effect in states where residents are eligible for such assistance…
As even some health law supporters concede, the claim that Congress denied to the federal exchanges the power to distribute tax credits and subsidies seems correct as a literal reading of the most relevant provisions. Those are sections 1311, 1321, and 1401, which provide that people are eligible for tax credits and subsidies only if “enrolled … through an Exchange established by the state” [emphasis added].
It’s technically not correct to say that Oklahoma’s complaint is a challenge to ObamaCare, however. That complaint does not challenge a single jot or tittle of the statute. Oklahoma is asking a federal court to force the IRS to follow the statute, and to prevent the Obama administration from imposing taxes on Oklahoma residents whom Congress expressly exempted. Oklahoma’s complaint is indeed “the broadest and potentially most damaging of the legal challenges” related to ObamaCare. But think about it: if the only way to save ObamaCare from such a fate is to give the president extra-constitutional powers to tax and spend money without congressional authorization, just how unstable is this law? And is it really worth saving?
But overall, a good article.
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.
As I posted a week ago today, 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:
We hope to post an updated draft of our paper, with lots of new material, soon.
Like others before him, Bagenstos’s main argument in support of the IRS reduces to the absurd claim that the federal government can establish an Exchange that is established by a state. He also offers two new arguments. Each is a non sequitur, and like his main argument is contradicted by the express language of the statute.
As I have written before:
[T]he 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).
(Bagenstos claims the statute’s tax-credit-eligibility provisions use the phrase “established by the State under section 1311” only twice. He neglects to mention: how the eligibility provisions refer to those limiting phrases an additional five times; that there is no language contradicting or creating any ambiguity about the limitation they create; and that the statute also restricts its “cost-sharing subsidies” to situations where “a credit is allowed” under those eligibility rules. At the risk of repeating myself, the eligibility rules for the credits and subsidies are so tightly worded, they seem designed to prevent precisely what the IRS is trying to do.)
Bagenstos correctly notes that Section 1321 directs the federal government to create Exchanges within states that fail to create their own. Like others before him, he takes that directive to mean that the phrase “established by the State under section 1311” in fact ”does not have the exclusionary meaning” you might think. The statute authorizes tax credits through federal Exchanges, he argues, because federal Exchanges are ”established by the State under section 1311.” The federal government, it turns out, can establish an Exchange that is established by a state.
Like others before him, Bagenstos finesses the absurdity of that claim by arguing that Section 1321 provides that a federal Exchange ”will stand in the shoes of a state-operated exchange.” So far as I can tell, the “stand in the shoes” trope was first advanced by Judy Solomon of the Center for Budget and Policy Priorities. It is based on a 180-degree misreading of Section 1321. If a state chooses not to dance, Section 1321 doesn’t instruct the federal government to step inside (read: commandeer) the state’s dancing shoes. It directs the federal government put on its own dancing shoes, and to follow all the dance steps listed in Title I. Since the language restricting tax credits to state-created Exchanges appears in—you guessed it—Title I, federal Exchanges are bound by that restriction.
Bagenstos’s second argument is that since it was not necessary for Congress to restrict tax credits to state-created Exchanges to overcome the “commandeering problem,” the statute does not do so. But that’s a non sequitur. Just because Congress didn’t have to do something doesn’t mean Congress didn’t do it. The express language of the statute says Congress did it.
Bagenstos’s third argument is that because the Senate Finance Committee didn’t have to restrict tax credits to state-created Exchanges in order to have jurisdiction to direct states to create them, the Committee-approved language—which is now law—must not do so. Again, that’s a non sequitur. And not only does the express language of the statute impose that restriction, but Senate Finance Committee chairman Max Baucus (D-MT) admitted that’s what he was doing.
Along the way, Bagenstos contradicts himself, Baucus, and Timothy Jost by categorically claiming, “Nor is there any reason to think that Congress would have intended to treat participants in state- and federally-operated exchanges differently,” while conceding the commandeering problem and the Finance Committee’s limited jurisdiction are two reasons why Congress might have intended to do so.
Bagenstos’s interpretation of the statute violates the “mere surplusage” canon of statutory interpretation. It violates the expressio unius est exclusio alterius canon of statutory interpretation. It violates common sense.
Like others before him, Bagenstos offers no rebuttal to Baucus’s admission that the statute means exactly what it says, and nothing whatsoever from the legislative history that supports the IRS’s attempt to violate the express language of the statute by imposing taxes that Congress never authorized.
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.
ObamaCare is far from settled law. Here’s an excerpt from Butler’s blog post for the Journal of the American Medical Association:
President Obama’s narrow victory has left proponents of the Affordable Care Act (ACA) breathing a collective sigh of relief, believing that the legislation is safe. It’s true, of course, that the election’s outcome has ended the prospect of a new administration using Republican majorities in both chambers and the budget reconciliation process to force outright repeal. But the reality of the economic and political situation means the core elements of the ACA remain very much in play.
The primary reasons for this are the continuing problems with the federal budget deficit and the national debt and the worrying long-term weakness of the economy. Add to that the increasing skepticism that the ACA’s blunt tools will slow costs.
Let’s remember that the most important provisions of the ACA, such as penalties for Americans lacking insurance and firms not offering it, the expansion of Medicaid, and the heavily subsidized exchange-based coverage, do not go into effect until 2014. Meanwhile, new taxes on self-employment and limits on flexible spending accounts are scheduled to go into effect next year, just as Congress will be trying to boost employment growth. Additionally, lawmakers will be desperately searching for ways to delay or cut spending to deal with the deficit. That adds up to 2013 being a year for buyer’s remorse in Congress and around the country.
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.
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