It Wasn't A Typo: Congress Meant Exactly What They Wrote About Obamacare Subsidies...And Here's Why

Congress ALWAYS intended for the Obamacare subsidies to ONLY be available in states with their own exchanges.  They were supposed to act as a carrot to induce states to create them.

Senator Baucus explains how The Affordable Care Act sets conditions where Tax Credits are available for State Exchanges Only...

http://www.c-span.org/video/?c4504852/senate-hearing-tax-credits-available-state-exchanges 

'Congress made subsidies available only through state exchanges as a means of coercing states into setting up exchanges.

In Senate Finance Committee deliberations on the ACA, Chairman Max Baucus (D-Mont.), one of the bill’s primary authors, suggested the possibility of conditioning tax credits on state compliance because only by doing so could the federal government induce state cooperation with the ACA. Then the law’s insurance requirements could be imposed on states without running afoul of constitutional law precedents that prevent the federal government from commandeering state governments. The pertinent language originated in the committee and was clarified in the Senate.'

And more...

'Many of the PPACA’s drafters and supporters in Congress, for example, clearly endorsed the idea of withholding health-insurance subsidies if states refused to meet Congress’ demands, such as by failing to establish Exchanges. This group includes:

1. Senators Durbin, Begich, Bingaman, Burris, Casey, Gillibrand, Klobuchar, Kohl, Lieberman, Lincoln, Pryor, Shaheen, and Specter. Each of these “aye” votes on the PPACA also sponsored S. 979, the Small Business Health Options Program Act of 2009, which offered tax credits to small businesses only “in a State which . . . maintains a State-wide purchasing pool that provides purchasers in the small group market a choice of health benefit plans, with comparative information provided concerning such plans and the premiums charged for such plans made available through the Internet” (i.e., an Exchange).

2. Senators Dodd, Bingaman (again), Brown, Casey (again), Hagan, Harkin, Merkley, Mikulski, Murray, Reed, Sanders, and Whitehouse. Each of these “aye” votes on the PPACA also voted for the S.1679, the Affordable Health Choices Act (reported by the Health, Education, Labor, and Pensions Committee), which withheld health-insurance subsidies from a state’s residents for four years if the state failed to establish an Exchange, and permanently if the state failed to implement the bill’s employer mandate.

3. Senate Finance Committee chairman Max Baucus (D-MT), who (1) wrote the PPACA language restricting subsidies to state-established Exchanges and preserved it through multiple drafts, (2) introduced a Health Coverage Tax Credit in 2002 that uses similar eligibility rules and that the Congressional Research Service says “can be claimed for only 10 types of qualified health insurance…7 of which require state action to become effective”; and (3) also in 2009 floated proposals that (like S. 979) would have conditioned health-insurance tax credits on states enacting certain laws.

That’s 24 of the 60 senators who approved the PPACA. There is no evidence they changed their minds before casting their votes.

The record also shows some members initially opposed the PPACA because of this feature. In an aforementioned letter to House Speaker Nancy Pelosi (D-CA) and President Obama, 11 Texas Democrats warned the PPACA allowed states to block their residents from receiving “any benefit” by refusing to establish an Exchange. Though they opposed this provision, when the PPACA became the only bill that could become law, all 11 of them grudgingly voted for it.'

Let's also not forget that the administration just reversed itself on the issue of whether Obamacare applied to US Territories.  According to its new position - after 'further review' - Obamacare's mandates and requirements only apply to the 50 United States and the District of Columbia, which is specifically dealt with in the law separately.  In other words, 'state' means an actual state, not just any 'government.'  So, how will the administration square that circle?

Here, the plain language of the ACA is straightforward: Section 1401 of the ACA, codified at Section 36B of the Internal Revenue Code, provides tax credit subsidies to individuals who buy insurance on exchanges “established by the State under section 1311″ of the ACA. Section 1304(d) clearly sets forth the definition of “State,” and it’s what you would expect: “the term ‘State’ means each of the 50 States and the District of Columbia.” A separate section of the ACA, section 1321, allows the federal government to “establish and operate such Exchanges within the State” if the State does not do so, and the statute nowhere provides a similar subsidy to buyers on the state exchanges or states that the federal exchange should be treated as a state exchange for purposes of the subsidies. This is not at all ambiguous.

Next time, Dems, perhaps, you shouldn't mock those that tell you to 'Read the Bill' and pass massive legislation in the middle of the night.

Right, John?

‘I love these members, they get up and say, ‘Read the bill’… What good is reading the bill if it’s a thousand pages and you don’t have two days and two lawyers to find out what it means after you read the bill?’ 

- Rep John Conyers

Eat that ‘Satan Sammich,’ John!

UPDATE:

The law authorizes the federal government to establish exchanges for states that refrain, but has no provision allowing tax credits to be offered to defray the costs of insurance policies offered on those federal exchanges. Without the tax credits, though, the policies will be prohibitively expensive for so many people that the law will not work.

So the Obama administration’s Internal Revenue Service decided that it would offer tax credits even on the federal exchange, which covers 36 states. The success of the program required going beyond the letter of the law — several hundred billion dollars beyond it over the next decade.

That decision, in addition to being legally questionable, created some losers. Various taxes and penalties in the law come into effect only when tax credits are available. Employers will be subject to a penalty for not offering insurance, for example, only if their employees get tax credits on an exchange. What the IRS has done, then, is to declare that it is going to collect taxes that Congress has not authorized in law. 

Several lawsuits have challenged the administration on this point. While it has won the early rounds of the cases, the D.C. Circuit Court of Appeals is now considering one of them. It could make it as far as the Supreme Court.

Jonathan Adler and Michael Cannon (the first a law professor at Case Western Reserve University, the second a health-policy analyst at the Cato Institute, both libertarians who have published often in NR) have made the case for the plaintiffs at length in Health Matrix, a journal of law and medicine. They want the courts to rule that the IRS must stop issuing tax credits, and also stop levying taxes and penalties that are tied to them, in the 36 states covered by the federal exchange.

Unlike the challenge to the individual mandate that the Supreme Court decided in 2012, these lawsuits do not question the scope of congressional power. Neither Adler nor Cannon nor any of the other people involved in the lawsuits denies that Congress had the legal power to extend tax credits to people getting insurance from a federal exchange. Congress could, for that matter, have stipulated in the law that for purposes of the law’s treatment of exchanges the federal government would be counted as a state; it did just that with respect to U.S. territories.

As we know, the Constitution grants only Congress the 'power to tax' and the Supreme Court has already held that the penalty in Obamacare is a 'tax'; thus, the IRS lacks the ability to collect unauthorised taxes.


UPDATE #2:

From Sean Davis at The Federalist:

Let’s take a step back to see how plausible that explanation is. There are two types of exchanges: state-established, and federally established. The statutory authority for state-based exchanges comes in section 1311 of Obamacare. The statutory authority for a federal exchange in the event that a state chose not to establish one comes from section 1321(c) of Obamacare. Right off the bat, we have two discrete sections pertaining to two discrete types of health exchange. Was that a “drafting error”?

Then we have the specific construction of section 1321(c), which allows for the creation of a federal exchange. Nowhere does this section say that an exchange created under its authority will have the same treatment as a state-based exchange created under section 1311. At no point does it say that section 1321 plans are equivalent. Why, it’s almost as though the exchanges and the plans offered by them were not intended to receive the same treatment. Was that another “drafting error”?

Most important, we have the sections of the law providing for tax credits to help offset the cost of Obamacare’s health care plans: sections 1401, 1402, 1411, 1412, 1413, 1414, and 1415. And how do those sections establish authority to provide those tax credits? Why, they specifically state ten separate times that tax credits are available to offset the costs of state health exchange plans authorized by section 1311. And how many times are section 1321 federal exchange plans mentioned? Zero. Was that yet another “drafting error”? 

The specific phrase “established by the State under section 1311″ can be found twice in the tax credit title of Obamacare. The first instances relates to the size and the second to the scope of the tax credit subsidy. How many times is the phrase “established by the Federal government/Secretary under section 1321″ found? Zero. Was that also a “drafting error”?

...

The clear text of the law repeatedly demonstrates that plans purchased via federal exchanges were never meant to be treated the same as plans purchased by state-based exchanges. Despite its assertions, the IRS was never granted the statutory authority to hand out tax credits related to plans purchased via a federal health exchange. 

All of that of course begs the question: if the law’s authors originally intended to constrain subsidies to state plans, what was the rationale for the IRS about-face in 2011? That’s actually an easy one to answer: the administration never imagined that so many states would refuse to establish Obamacare exchanges. The subsidies for state exchange plans were meant to be pot sweeteners—incentives for states to set up their own exchanges. If fines for mandate non-compliance were Obamacare’s stick, the subsidies for state exchange health plans were the carrot. To the law’s backers, that plan made sense: the White House didn’t really want to have to manage 51 separate exchanges. They wanted the states to do all the heavy lifting. Unfortunately, several dozen legislatures and governors had different plans.

...

So why did the IRS wait nearly 16 months to spring this new interpretation on the public? That’s also an easy one. As of August 17, 2011, when its rule was first proposed, only ten states had passed laws establishing their own exchanges. Seventeen had outright rejected the Obamacare exchanges. All told, 40 states had by that point failed to do the administration’s bidding and set up state-based Obamacare exchanges.

Without exchanges in every state, Obamacare would surely fail as a policy matter. And without massive subsidies to offset the costs of Obamacare’s health plans, Obamacare would fail as a political matter. The IRS maneuver was a last-ditch attempt to paper over the law’s serious structural flaws. 

The Halbig case changed all that and ripped off the facade to expose a structure ready to collapse under its own weight. And it wasn’t due to a “drafting error,” the uninformed opinions of know-nothing bloviators who’ve spent exactly zero time drafting federal legislation notwithstanding.

UPDATE #3:

Here, the plain language of the ACA is straightforward: Section 1401 of the ACA, codified at Section 36B of the Internal Revenue Code, provides tax credit subsidies to individuals who buy insurance on exchanges “established by the State under section 1311″ of the ACA. Section 1304(d) clearly sets forth the definition of “State,” and it’s what you would expect: “the term ‘State’ means each of the 50 States and the District of Columbia.” A separate section of the ACA, section 1321, allows the federal government to “establish and operate such Exchanges within the State” if the State does not do so, and the statute nowhere provides a similar subsidy to buyers on the state exchanges or states that the federal exchange should be treated as a state exchange for purposes of the subsidies. This is not at all ambiguous.

UPDATE #4:

From Michael Cannon:

Last year, seven career Treasury and IRS officials told congressional investigators that they knew the PPACA did not authorize them to issue tax credits in federal exchanges, and that their regulations had originally confined tax credits to exchanges “established by the State.” At the direction of their political-appointee superiors, however, they dropped that language and announced that tax credits would be available through exchanges established by the federal government as well.