Obamacare tax credit suit rejected

A District of Columbia federal judge rejected a lawsuit Wednesday that challenged tax credits for Obamacare coverage in the 36 states with federal-run exchanges – one of the most significant remaining legal fights over President Barack Obama’s health care law.

The four individuals who brought the lawsuit, Halbig v. Sebelius, had argued that the IRS overstepped its legal authority by allowing federal-run exchanges to provide tax credits for people who purchase health insurance. They contended that the Affordable Care Act only allows for state-run exchanges to access such credits and that Congress purposefully designed the law that way to incentivize states to run their own insurance marketplaces.

Had the court accepted their argument, the ACA could have been dealt a major blow. With just 14 states and D.C. running their own exchanges, the result could have blocked most of the country from getting federal help to purchase insurance on the new exchanges.

U.S. District Judge Paul Friedman, a Clinton nominee, said an entire reading of the law and congressional intent make clear that the lawprovides premium tax credits through all exchanges, regardless of who’s running them.

“The Court finds that the plain text of the statute, the statutory structure, and the statutory purpose make clear that Congress intended to make premium tax credits available on both state-run and federally-facilitated Exchanges,” Friedman wrote in his decision.

>> “The Court finds that the plain text of the statute, the statutory structure, and the statutory purpose make clear that Congress intended to make premium tax credits available on both state-run and federally-facilitated Exchanges

Really?

Here is the plain text of the statute (PPACA):

SEC. 1401(a) In General.--Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by inserting after section 36A the following new section:

SEC. 36B (a) In General.--In the case of an applicable taxpayer, there shall be allowed 
             as a credit against the tax imposed by this subtitle for any taxable year 
             an amount equal to the premium assistance credit amount of the taxpayer for
             the taxable year.

         (b) Premium Assistance Credit Amount.--For purposes of this section--
        
             (1) In general.-- <> The term `premium assistance 
                 credit amount' means, with respect to any taxable year, the sum 
                 of the premium assistance amounts determined under paragraph (2)
                 with respect to all coverage months of the taxpayer occurring 
                 during the taxable year.
 
             (2) Premium assistance amount.--The premium assistance amount determined
                 under this subsection with respect to any coverage month is the amount
                 equal to the lesser of--

                    ``(A) the monthly premiums for such month for 1 or more 
                          qualified health plans offered in the individual   
                          market within a State which cover the taxpayer, the 
                          taxpayer's spouse, or any dependent (as defined in 
                          section 152) of the taxpayer and which were enrolled in 
                          through an Exchange established by the State under 1311 
                          of the Patient Protection and Affordable Care Act, or

                    ``(B) the excess (if any) of--
                           ``(i) the adjusted monthly premium for such 
                                 month for the applicable second lowest cost silver 
                                 plan with respect to the taxpayer, over
                          ``(ii) an amount equal to 1/12 of the product 
                                 of the applicable percentage and the taxpayer's 
                                 household income for the taxable year.

36B(b)(2) specifies the premium assistance amount is equal to the lesser of A or B [that is: the lesser of SEC. 36B(b)(2)(A) or SEC. 36B(b)(2)(B)].

How to you suppose that the premium assistance credit amount of the taxpayer is the lesser of their premium under (A) [explicitly specified as a state exchange under 1311], or (B) [which is claimed includes federal plans]? Is the taxpayer in both a state and federal exchange and whichever is the lesser premium applies?

If the claim that 36B(b)(2)(B) includes federal exchanges is correct, then 36B(b)(2)(A) must also include federal exchanges, something it explicitly does not do. Therefor 36B(b)(2)(B) must necessarily also refer to Exchanges established by the State under 1311, otherwise 36B(b)(2) would be meaningless because a taxpayer can not be enrolled in both a state and federal exchange and whichever is the lesser premium applies.

The PPACA explicitly allows tax credits for state-run exchanges and excludes such credits for federally run exchanges.

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