Ramesh Ponnuru on the Vulnerability of the ACA Exchanges

by Reihan Salam

Ramesh Ponnuru’s latest Bloomberg View column explains why the exchanges established under the Affordable Care Act are vulnerable to legal challenge:

Obama’s plan makes tax credits available to people who get health insurance from exchanges set up by state governments. If states don’t establish those exchanges, the federal government will do so for them. The federal exchanges, however, don’t come with tax credits: The law authorizes credits only for people who get insurance from state-established exchanges. And that creates some problems the administration didn’t foresee, and now hopes to wish away.

Legislative debate over the law didn’t go into great detail about these provisions. We can surmise what happened, though. Supporters of the legislation wanted to encourage states to set up the exchanges. So they offered the states a deal: If they did so, they would get to write their own rules, and their citizens would be able to get the tax credit. The states would also gain extra flexibility on Medicaid spending. The law’s supporters also expected the health-care law to become more popular over time. [Emphasis added]

Ramesh goes into detail as to why many state governments have, for now at least, decided that the costs of establishing exchanges outweigh the benefits. And so the IRS has determined that individuals purchasing insurances via exchanges established by the federal government will be eligible for tax credits after all. This has set the stage for a new round of litigation.