Tag: premium subsidies

States Should Flatly Refuse to Create ObamaCare Exchanges (New Cato Video)

This new Cato Institute video explains why it is in no state’s interest to create an ObamaCare Exchange.

Many thanks to Cato’s very talented Caleb O. Brown and Austin Bragg.

For the more-words-no-pictures version, click here or here. For a word about ObamaCare profiteers the pro-Exchange lobby, click here. Click here to read about what is happening in the states.

A Potentially Fatal ObamaCare Glitch

In today’s Wall Street Journal, Jonathan Adler and I explain how a recently discovered glitch could be the undoing of ObamaCare:

ObamaCare authorizes premium assistance in state-run exchanges (Section 1311) but not federal ones (Section 1321). In other words, states that refuse to create an exchange can block much of ObamaCare’s spending and practically force Congress to reopen the law for revisions.

The Obama administration wants to avoid that legislative debacle, so this summer it proposed an IRS rule to offer premium assistance in all exchanges “whether established under section 1311 or 1321.” On Nov. 17 the IRS will hold a public hearing on that proposal…

Any employer whose employees receive premium assistance through a federal exchange…would have standing to challenge these illegal tax credits and outlays.

Public-interest lawyers could file suit as soon as the IRS rule becomes final and they find an employer that will be harmed. Any firm that doesn’t offer health benefits and that employs lots of full-time, low-skilled, young workers in a state that fails to create an exchange should suffice. A successful challenge would block the law’s employer mandate in that state.

In addition, under the Congressional Review Act, a simple (filibuster-proof) majority vote in each chamber of Congress could send to President Obama’s desk a resolution blocking this IRS rule. Even if Mr. Obama vetoed the resolution (taking personal responsibility for this assault on the rule of law), a future president could still rescind the rule.

According to the IRS notice, the public hearing will take place tomorrow, Thursday, November 17, “at 10 a.m., in the auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. All visitors must present photo identification to enter the building.” Those interested should consult the IRS notice (p. 50938) for more information.

Latest ObamaCare Glitch Enables States to Block New Entitlement Spending

Investors Business Daily reports on the latest glitch found in ObamaCare’s 2,000-plus pages:

Because of a quirk in ObamaCare, people who buy health insurance through a federally run exchange may not be eligible for premium subsidies.

Government-created exchanges are places for individuals to shop and purchase health insurance. ObamaCare will require individuals and families to buy insurance, starting in 2014.

Those with incomes at 100% to 400% of the federal poverty level will be eligible for taxpayer funded subsidies — a tax credit to help pay for the premium.

It turns out that the legislation isn’t so clear, the latest example of what analysts predicted would be a stream of surprises from the mammoth health law.

Section 1311 of ObamaCare instructs state governments to set up an exchange. If a state refuses, Section 1321 lets the federal government establish an exchange in the state.

Yet ObamaCare states that the tax credit is available to people who are enrolled in an “an exchange established by the state under (Section) 1311.” It makes no mention of people enrolled in federal exchanges being eligible for the tax credit.

“There is this technical problem in the law,” said James Blumstein, a professor at Vanderbilt Law School. “I don’t see how you get around that.”

I guess the folks who chanted, “Read the bill!” seem a little less crazy now.

Regrettably, the IRS has tried to “get around” the clear meaning of the law.  In a proposed rule, the IRS writes that taxpayers will be eligible for ObamaCare’s “tax credits” – which are more government spending than  – if they are enrolled in a health plan “established under section 1311 or 1321” [emphasis added].  But that’s not what the law says.  As I told IBD:

“Congress did not delegate this discretion to the IRS,” Cannon said. “Congress created a tax credit for A, and the IRS is saying it applies to A and B. If the IRS offers this tax credit to federally run exchanges, the IRS will be assuming powers the Constitution vests only in Congress to alter the tax code and spend money.”

Citizens have until October 31 to share with the IRS their thoughts about the agency’s overly broad interpretation of its powers (see here).

More broadly, this bug feature means that states can block ObamaCare’s new entitlement spending, and possibly the entire law, just by refusing to create an Exchange:

“The whole structure of the law collapses without a state-run exchange,” said Michael Cannon, director of health policy studies at the libertarian Cato Institute. “That forces Congress to either repeal ObamaCare or significantly alter it.”

Yesterday, Rep. Michael Burgess (R-Texas) helpfully suggested that the so-called “Super Committee” should meet its target of $1.5 trillion in spending reductions by cutting ObamaCare’s new entitlement spending:

The Select Committee is getting to work, and I encourage both parties, all 12 members, to put the Affordable Care Act on the table, alongside other entitlements in need of reform…The easiest money to save is money you haven’t yet spent…This new select committee could easily achieve almost their entire target of reducing the nation’s deficit, and…almost every dollar would come from benefits that do not yet exist.

The wonderful thing about this newly discovered feature of ObamaCare is that states don’t have to wait for Congress to act.  They can reduce federal spending simply by not creating a health insurance Exchange.