In a recent post, we explained how Republicans' pathological opposition to health care reform is motivated by the GOP's fear that reform will demonstrate that government can be successful in improving the lives of everyday Americans. Because of this fear, conservatives have sought to derail President Obama's Affordable Care Act ("ACA") through lawsuits, 31 separate and pointless votes by House Republicans to repeal the law, refusals by GOP Governors to implement various portions of the law, and more than a quarter-of-a-billion in advertising attacking the law.
Today's post will look at perhaps the most cynical branch of the GOP's anti-health care reform effort - the refusal of various Republican-led states to develop health insurance exchanges. Such refusal initially appeared to be just symbolic, as the federal government will establish exchanges for those states. But conservatives are now pushing the argument that an apparent drafting error in the ACA means that families earning under $88,000 per year who purchase insurance through a federally-created exchange (rather than a state exchange) cannot receive the significant tax benefits that were included in the ACA to make purchasing insurance more affordable. In other words, the GOP's obsession with trying to defeat health care reform is now threatening to come at the cost of hundreds or thousands of dollars per year for working and middle class families.
A core element of the ACA's effort to expand insurance coverage to 32 million more Americans is a grand bargain under which people are required to purchase insurance (or else pay a fine) while insurance is to be made fairer and more affordable through health insurance exchanges and tax credits. The exchanges are essentially an on-line marketplace in which insurance companies are required to meet certain standards and where it will be easy to make side-by-side comparison of the insurance options available. Whether created by a state or the federal government, the exchanges will be overseen by the federal Office of Personnel Management and/or state-based non-profits to help ensure fairness and transparency. As for affordability, the ACA provides sliding scale refundable tax credits to people earning up to approximately $88,000 for a family of four, or $43,320 for an individual, in order to limit spending on health insurance premiums to between 2 and 9.5% of income.
Conservatives are seeking to disrupt this bargain by seizing on an apparent error in the drafting of the law. The error stems from the fact the provisions calling for states to create health insurance exchanges are found in Section 1311 of the ACA, while the ability of the federal government to create an exchange in a state that fails to do so is found in Section 1321 of the ACA. Yet Section 1401 of the ACA, which establishes the tax credits for families earning up to $88,000 per year, provides that the credits are for people who enrolled in a health insurance plan "through an Exchange established by the State under 1311." In other words, a strict reading of the text of the ACA suggests that refundable tax credits should only go to people purchasing insurance through an exchange created by a state under Section 1311, not through an exchange created by the federal government under Section 1321.
Conservatives have seized on this language as another way to attack health care reform. For example, in a paper ridiculously titled "Taxation Without Representation," conservative law professor Jonathan Adler and the Cato Institute's Michael Cannon contend that Congress intended to limit tax credits to only state-created exchanges and that, even if Congress did not specifically intend such limitation, the plain language of the statute should govern on this issue. And conservative legislators, such as Orrin Hatch (R-UT), have attacked IRS regulations that extend the tax credits to everyone purchasing insurances instead of just people purchasing insurance through state created exchanges. Other scholars, such as Law Professor Timothy S. Jost, counter that this is clearly a situation involving just poor drafting that a court can ignore or correct because it is obvious that Congress never intended to limit health care tax credits only to states where the state itself created the exchange.
To our knowledge, no one so far has filed any litigation challenging the IRS regulations extending the tax credit to all exchanges, rather than to just state exchanges. But, in the absence of a Congressional fix (which is a virtual impossibility given GOP control of the House), it seems inevitable that such a challenge will be pursued. And if and when such litigation is pursued, it will be useful to remind voters and the media that the only impact of such litigation would be to significantly increase the cost of health insurance to middle and working class Americans in states like Texas where the Governor had decided to forgo creating a state level health insurance exchange.