The One Word That Could Trip Up Obamacare

by Veronique de Rugy

Writing in the Washington Post, Sarah Kliff highlights an important new paper by Cato Institute’s Michael Cannon and Case Western Reserve University’s Jonathan Adler that argues that because of the way the health-care law was written any federally established health-insurance exchange does not have the authority to pay out health-insurance subsidies. This could be a big deal since the $800 billion in tax credits in the bill is what is supposed to cover low and middle-income Americans who can’t get health-care coverage through the states’ exchange. She explains:

Let’s back up and look at Adler and Cannon’s argument. It starts with the the Affordable Care Act’s defining a health insurance exchange, in scintillating Section 1311, as a “governmental agency or nonprofit entity that is established by a state.”

The last three words are the crucial ones, because they indicate that only states can establish exchanges under that Section 1311. There’s a whole other part of the law, Section 1321, that allows the federal government to set up federal exchanges in states that do not take on the task themselves.

This all matters in the all-important Section 1401, where it lays out who can get a federal insurance subsidy. There, the law says that only those who are “enrolled … through an Exchange established by the State under 1311.”

If there’s a smoking gun in this case, it’s that sentence right there. It says that the only people who can qualify for subsidies are those who get coverage through a state-based exchange.

If the bill was properly drafted (which is a separate question altogether considering how fast it was written) and Cannon and Adler are correct, the “tax subsidies were meant [to] encourage states to build exchanges and not leave the task to the federal government,” Kliff explains.

Now the question is whether this “missing word” (whether it was intentional or not) could have legal implications for the implementation of the law. Of course, considering the last Supreme Court ruling and the surprises that came with it, there is no way to know.

Cannon and Adler’s paper is here.