Rule of Law

Are state and federal exchanges different animals?



Some Patient Protection and Affordable Care Act opponents are trying to use the definition of “exchange” to resist at least some efforts to implement the law.


The opponents are ramping up efforts to argue that, legally, the state-run exchanges created by PPACA are completely different from the public exchanges run by the U.S. Department of Health and Human Services.


Members of the U.S. House Oversight & Government Reform health care subcommittee considered the nature of state and federal exchanges today at a hearing.


Scott Pruitt, the Oklahoma attorney general, argued the Obama administration has no authority to make the new PPACA health insurance tax credit subsidy available to moderate-income consumers who buy health coverage through the federal exchanges.


PPACA drafters included no language specifically allowing the government to make the tax credit available in states in which officials decided against setting up their own, state-based exchanges under PPACA, Pruitt said.


In a state in which HHS is stepping in to create a “federally facilitated exchange,” under PPACA Section 131(c), the language of the law lets an individual receieve a PPACA tax credit subsidy only when the individual buys coverage through a state-based exchange, Pruitt said.


The U.S. Treasury Department, the parent agency of the Internal Revenue Service, said in a final regulation issued May 18, 2012, that a federal exchange can offer individuals access to the PPACA subsidy.


“The Treasury brushed aside critical comments with the most cursory analysis,” Pruitt said. “Nowhere does the notice indicate that the Treasury considered contrary evidence.”


Simon Lazarus, senior counsel at the Constitutional Accountability Center, said PPACA opponents are taking parts of PPACA out of context and ignoring the intent of the drafters of the law.


“The text and purpose of the ACA are in harmony,” Lazarus said.


The drafters did not give opponents a stake they can plunge into PPACA’s heart, Lazarus said.


Jonathan Adler, a Case Western Reserve University law professor who agrees that the Obama administration has no statutory authority under PPACA to offer the PPACA tax credit to federal exchange users, said the lack of authority is the result of the weak support backers had.


Normally, Congress would have had a conference committee iron out differences between the House and Senate versions of a bill and fix any problems, Adler said.


Because Democratic congressional leaders would have had trouble getting a conference bill to the Senate floor, they decided to have the House approve the Senate’s flawed version of the bill as is, Adler said.


“There were not the votes to do anything else,” Adler said.