July 8, 2012 2:30PM # ‘Health Law Critics Prepare to Battle Over Insurance Exchange Subsidies’ By [Michael F. Cannon](https://www.cato.org/people/michael-f-cannon) --- SHARE [The *New York Times*](http://www.nytimes.com/2012/07/08/us/critics-of-health-care-law-prepare-to-battle-over-insurance-exchange-subsidies.html): > WASHINGTON — Critics of the new health care law, having lost one battle in the Supreme Court, are mounting a challenge to President Obama’s interpretation of another important provision, under which the federal government will subsidize health insurance for millions of low- and middle-income people. > > > Starting in 2014, the law…offers subsidies to help people pay for insurance bought through markets known as insurance exchanges. > > > At issue is whether the subsidies will be available in exchanges set up and run by the federal government in states that fail or refuse to establish their own exchange… > > > “The language of the statute is explicit,” Mr. Blumstein said. “Subsidies accrue to people who obtain coverage through state-run exchanges. The I.R.S. tries to get around that by providing subsidies for all insurance exchanges. That interpretation will almost certainly be challenged by someone.” > > > The most likely challenger, Mr. Blumstein said, is an employer penalized because one or more of its employees receive subsidies through a federal exchange. Employers may be subject to financial penalties if they offer no coverage or inadequate coverage and at least one of their full-time employees receives subsidies. > > > Michael F. Cannon, director of health policy studies at the libertarian Cato Institute, said the link between subsidies and penalties was a crucial part of the law. > > > “Those tax credits trigger the penalties against employers,” Mr. Cannon said. If workers cannot receive subsidies in states with a federal exchange, their employers cannot be penalized, he said. [Tax credits are not subsidies](https://www.cato.org/there-aint-no-such-thing-as-a-tax-subsidy-either/), of course. But ObamaCare’s $800 billion of refundable premium-assistance tax credits and cost-sharing subsidies are three parts subsidy (i.e., government spending) and only one part tax reduction. ##### Related Tags [General](https://www.cato.org/general), [Government and Politics](https://www.cato.org/government-politics), [Health Care](https://www.cato.org/health-care) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).