It all started in 2011, when Jonathan H. Adler, a conservative law professor at Case Western Reserve University in Ohio, shot an email to his friend Michael Cannon, a health policy expert at the libertarian Cato Institute in Washington, D.C. Adler thought he had spotted an error in Obamacare that could unravel a significant portion of the law.
At issue are the federal subsidies for individuals buying insurance in their state’s health care exchanges. The law stipulates that those subsidies should be allotted for plans purchased “through an Exchange established by the State under Section 1311”, a reference to the section of the law that establishes state-run exchanges.
Adler wondered: Did the law provide subsidies for only state-run exchanges and not federal ones? The law requires that the federal government step in to create an exchange when a state declines to do so. But does it fail to give subsidies to the residents of those states?
It may seem like a small problem, but if true, it spells disaster for the Affordable Care Act. Without subsidies, health care on the individual market becomes unaffordable. Without an affordable option, the individual and employer mandates disappear. In other words, the entire law could come crashing down in the 36 states that have opted not to run their own exchanges.(snip)
…Meanwhile, Adler and Cannon recorded their finding in a Wall Street Journal op-ed in November 2011. The IRS was acting against the plain language of the law, they argued. As Cannon tells it, the duo then decided to do more research, which led them to believe that this was not, as they had called it in the Journal, a “glitch.” Instead, they argue Congress intentionally decided to withhold subsidies from federal exchanges.
Constitutionally, the federal government cannot order states to create the exchanges, so Adler and Cannon contend that Democratic lawmakers intentionally withheld premium assistance to strong arm states into implementing their own exchanges. Though this is not explicitly stated in the law, Cannon and Adler point to a handful of comments that they argue infer subsidies were intended for state-run exchanges – but there is no explicit evidence. Now that 36 states decided not to create their own exchange, Cannon and Adler maintain that the IRS is not carrying out the letter of the law.
“President Obama is trying to do the exact opposite of what the law says,” Cannon said.
