One of the issues underlying Halbig v. Sebelius and three similar lawsuits making their way through federal courts is whether Congress intentionally restricted the Patient Protection and Affordable Care Act’s (PPACA) private health-insurance subsidies to individuals who buy coverage through state-established exchanges. If so, that would mean the Internal Revenue Service’s decision to issue subsidies in the 34 states that did not establish exchanges (i.e., that have federally established exchanges) is illegal. For more on the IRS’s attempt to rewrite the PPACA in this fashion, click here.
On Twitter, a skeptic challenges my coauthor Jonathan Adler claim that Congress intended to withhold subsidies in states that did not establish exchanges, arguing “The exchanges serve no purpose at all absent subsidies. Is there no golden rule at all in American jurisprudence?” (Read the entire exchange here.)
In legal jargon, the skeptic argues that a literal interpretation of the statutory language restricting subsidies to those enrolled “through an Exchange established by the State” would be absurd, and the courts should defer to the agency’s reasonable interpretation.
Exchanges, however, are regulatory bureaucracies that perform other functions and serve other purposes besides dispensing subsidies, as the PPACA’s authors and the president acknowledged. In 2009, President Obama said that health insurance exchanges “would allow families and some small businesses the benefit of one-stop-shopping for their health care coverage and enable them to compare price and quality and pick the plan that best suits their needs.” Senate Majority Leader Harry Reid (D-NV) said PPACA “guarantees real choice and competition to keep insurers in check… By creating strong competition, we’ll reduce skyrocketing health care costs.” The PPACA’s Senate drafters wrote, “Insurers that jack up their premiums before the Exchanges begin will be excluded–a powerful incentive to keep premiums affordable.”
In fact, the exchanges are supposed to perform more than a dozen functions besides issuing subsidies. Here are some of the ways PPACA’s health insurance exchanges attempt to serve the goals of “one-stop shopping,” price and quality comparisons, expanding choice and competition, and reducing health insurance premiums, even in the absence of subsidies: