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Wednesday, June 27, 2012

If ObamaCare Survives, IRS's Authority to Issue Tax Credits to Face Challenge

IRS Logo 2The Volokh Conspiracy:  If Health Reform Law Survives, Litigation Will Continue, by Jonathan H. Adler (Case Western):

Unless the Supreme Court decides to eliminate the Patient Protection and Affordable Care Act in its entirety, Florida v. Sebelius is not the end of health care reform litigation, but only the beginning. ... In tomorrow’s USA Today, Cato’s Michael Cannon and I discuss another potential lawsuit that will be filed if the health care law survives: A challenge to the IRS rule providing tax credits and premium assistance for qualifying health insurance plans sold on federally run exchanges. As I noted here and here, the text of the PPACA only authorizes tax credits and premium assistance for insurance plans purchased in state-run exchanges. If a state refuses to create an exchange, the federal government is supposed to create a “fallback” exchange, but the law does not provide for tax credits and premium assistance for insurance plans purchased on these “fallback” exchanges. The IRS rule tries to fix this by rewriting the statute, without any textual warrant. I discussed the rule in this Cato video. ...

[I]f and when a lawsuit is filed, I am reasonably confident the IRS rule will fall. The text of the statute is clear. When Michael Cannon and I first wrote about these provisions, and the then-proposed IRS fix, we considered the possibility that the PPACA’s text, however clear, was inadvertent. Having now had the opportunity to review the relevant legislative history, we are convinced the limitation of tax credits and premium assistance to state-run exchanges was intended as an incentive for states to create their own exchanges. The evidence in the record on this point is abundant and clear, which would explain why the IRS has had such a hard time citing any specific text or history in support of its rule. ... Michael Cannon has more here.

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