Critics of Health Care Law Prepare to Battle Over Insurance Exchange Subsidies

Starting in 2014, the law requires most Americans to have health insurance. It also offers subsidies to help people pay for insurance bought through markets known as insurance exchanges.

At issue is whether the subsidies will be available in exchanges set up and run by the federal government in states that fail or refuse to establish their own exchanges.

Critics say the law allows subsidies only for people who obtain coverage through state-run exchanges. The White House says the law can be read to allow subsidies for people who get coverage in federal exchanges as well.

The law says that “each state shall” establish an exchange. But Washington could be running the exchanges in one-third to half of states, where local officials have been moving slowly or openly resisting the idea.

The dispute has huge practical implications. The Congressional Budget Office predicts that 23 million uninsured people will gain coverage through exchanges and that all but five million of them will qualify for subsidies, averaging more than $6,000 a year per person. Subsidies, in the form of tax credits, will be available to people with incomes from the poverty level up to four times that amount ($23,050 to $92,200 for a family of four).

Some supporters of the law say Congress may have made a mistake in drafting this section. But, they add, the intent of Congress is clear: subsidies should be available in federal as well as state exchanges.

The law says that subsidies will be provided to residents of a state to help defray the cost of health plans offered “through an exchange established by the state.”

A rule issued by the Obama administration allows tax credits for insurance bought in either a state or a federal exchange.

Political brawling over health care will continue this week on Capitol Hill. The House plans to vote on a Republican measure to repeal the 2010 health care law, Mr. Obama’s most significant legislative achievement. Democrats, who control the Senate, say repeal efforts have no chance of success there.

Representative Phil Roe, Republican of Tennessee, said the rule on premium subsidies “contradicts the explicit statutory language” of the Patient Protection and Affordable Care Act. Mr. Roe and another Tennessee Republican, Scott DesJarlais, have introduced a bill to nullify the rule, issued by the Internal Revenue Service.

Douglas H. Shulman, the I.R.S. commissioner, defended the rule as consistent with the intent of Congress. “The statute,” he said, “includes language that indicates that individuals are eligible for tax credits whether they are enrolled through a state-based exchange or a federally facilitated exchange.”

However, Senator Orrin G. Hatch of Utah, the senior Republican on the Senate Finance Committee, said the Obama administration was usurping the role of Congress and rewriting the law to provide tax credits through federal exchanges.

White House officials have repeatedly underestimated opposition to the health care law. They predicted that public support for the law would grow as people learned more about it. They minimized lawsuits challenging the constitutionality of the requirement for most Americans to carry health insurance. They predicted that states would embrace the opportunity to insure more of their residents by expanding Medicaid and creating insurance exchanges, but a number of states have balked.

James F. Blumstein, a professor of constitutional and health law at Vanderbilt University, said the dispute over subsidies involved a serious legal issue.

“The language of the statute is explicit,” Mr. Blumstein said. “Subsidies accrue to people who obtain coverage through state-run exchanges. The I.R.S. tries to get around that by providing subsidies for all insurance exchanges. That interpretation will almost certainly be challenged by someone.”

The most likely challenger, Mr. Blumstein said, is an employer penalized because one or more of its employees receive subsidies through a federal exchange. Employers may be subject to financial penalties if they offer no coverage or inadequate coverage and at least one of their full-time employees receives subsidies.

Michael F. Cannon, director of health policy studies at the libertarian Cato Institute, said the link between subsidies and penalties was a crucial part of the law.

“Those tax credits trigger the penalties against employers,” Mr. Cannon said. If workers cannot receive subsidies in states with a federal exchange, their employers cannot be penalized, he said. That, in turn, would hobble federal efforts to get employers to offer coverage in those states, Mr. Cannon said.

Prof. Timothy S. Jost, an expert on health law at Washington and Lee University, said Congress had made “a drafting error” that should be obvious to anyone who understands the new health care law.

“There is no coherent policy reason why Congress would have refused premium tax credits to the citizens of states that end up with a federal exchange,” said Mr. Jost, who supports the law.

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Doctors urged to prepare for health care reform

Health care workers at a recent symposium in Greenville heard suggestions for improving the delivery of health care to eastern North Carolina, a region challenged by medical issues among some populations. They also were given an overview of the approaching effect of health care reform.

President Barack Obama signed the Affordable Care Act into law in 2010, but the bulk of reform takes effect in 2014.

At the Health Care Reform Symposium on Friday at the East Carolina Heart Institute, Allen Feezor, senior policy adviser with the N.C. Department of Health and Human Services, told the audience that he hoped his remarks on health care reform would prompt them to take action now to prepare for the new law’s effect on their medical practices and facilities in 2014.

Feezor stressed that health care reform is a law despite pending court challenges elsewhere.

“We still seem to talk about health care reform as if it’s a bill,” he said. “The fact of the matter is it is law.”

States that aren’t preparing for the law’s implementation were “bordering on being derelict in (their) duties,” Feezor said.

State officials must manage the law’s enactment under tight timelines. And many key points are resolved by states, including decisions on which benefits are considered essential.

“The heavy lifting is left up to the states,” he said.

Feezor, who said his presentation was a reflection of his own opinions, not those of his department or Gov. Beverly Perdue’s administration, said the law missed some opportunities, including ones aimed at cost containment.

Despite the state’s budget crunch, states need to put the infrastructure in place to enroll the uninsured, a scenario that could cause some initial problems with some enrollments. However, he said North Carolina has the process under way, so it can be ready.

The good news is about a million more people will have health care financing, he said, but the bad news is the increased demand could create a strain on medical practices that aren’t ready for it 20 months from now.

“That’s a big bump for demand on health care services,” he said.

Many people will be served by the tax credit exchange program. In addition, it’s estimated there will be 500,000 to 600,000 new Medicaid recipients, with a “significant number of them in eastern North Carolina,” Feezor said.

About 50,000 small businesses statewide are expected to offer insurance for the first time, and about 250,000 people with individual coverage could switch to the exchange program, he said.

Health care providers can expect to see a surge in demand for services, Feezor said, with people “starting to hit your doors and our clinics” for services.

He urged his audience to be prepared and also to enlist the help of community-based organizations to find the uninsured and begin the enrollment process early on to combat the expected crush.

Providers also need to be ready to generate more data due to the requirements for greater accountability.

The symposium is one of several events that will be held for the health care community to address issues in eastern North Carolina. It was jointly sponsored by ECU’s Brody School of Medicine and University Health Systems of Eastern Carolina.

The public can find out more information on health care reform at the federal website address of HealthCare.gov.

Contact K.J. Williams at kwilliams@reflector.com or 252-329-9588.

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