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The Latest Effort to Undo Health Reform

July 16, 2012 at 3:57 PM

Led by Representative Michele Bachmann (R-MN) and Senator Jim DeMint (R-SC), a group of Republican members of Congress recently asked governors to help them undermine health reform’s implementation by refusing to set up the “exchanges” that will give consumers a choice of private health insurance plans.

The federal government will set up exchanges in states that don’t do it themselves, but the Bachmann-DeMint letter claims that people in states with federally run exchanges won’t be eligible for the premium tax credits that low- and moderate-income people in other states will get to help them buy coverage through the exchange.  This claim rests on a distorted reading of the health reform law (i.e., the Affordable Care Act or ACA), as our new paper explains.

  • Section 1321 of the ACA says that if a state elects not to establish its own exchange or will not be ready to operate its exchange in 2014, “the Secretary shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements” (emphasis added).  In other words, the federal government will stand in the shoes of a state that elects not to operate an exchange by establishing and operating the exchange on the state’s behalf.

  • Section 36B of the Internal Revenue Code, which was added to the Code by section 1401 of the ACA, specifically refers to federal exchanges in requiring all exchanges — state and federally operated — to report to the federal government on the amount of advance payments of premium credits that taxpayers receive.  That provision would make absolutely no sense if people purchasing coverage through a federally operated exchange were not eligible for the credits.
  • If premium credits were not available in states with federally operated exchanges, residents of such states would not qualify for help buying coverage in the exchange, while residents of states establishing their own exchanges would qualify.  This would clearly be inconsistent with the purpose of the health reform law, which is to ensure that all Americans have a path to affordable coverage regardless of where they live.  As Chief Justice Roberts noted in referring to the ACA’s Medicaid expansion, the exchanges are “an element of a comprehensive national plan to provide universal health insurance coverage.”
  • The Treasury Department has specifically rejected the argument that people buying coverage through a federally operated exchange are not eligible for premium credits.  A court considering this question would almost certainly defer to the Treasury interpretation.