Case Western Reserve University’s Jonathan Adler and Cato Institute’s Michael Cannon argue in a new paper that any federally-established health insurance exchange does not have the authority to dole out health insurance subsidies. Those subsidies are important: They are the $800 billion in tax credits meant to subsidize coverage for low- and middle-income Americans.
If that is true — and it’s worth noting that the Obama administration, along with a number of legal scholars, argue that it is not — it would significantly curtail the Affordable Care Act’s ability to do what it’s supposed to do: make health care affordable. And that puts Section 1401 at the center of a burgeoning debate over what Congress meant when it wrote the Affordable Care Act, and how that effects its ultimate implementation.
“It could be an Achilles’ heel,” Cannon said.
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.