When Obamacare was drafted and approved, it had a provision in it called 36B. The provision allows the IRS to offer tax credits to anyone who enrolled for healthcare insurance. However, the provision clearly says that the tax credits are for those who enroll in an exchange established by the state.
The authors of Obamacare had hoped and planned that all fifty states would establish their own healthcare exchanges. That wasn’t the case. In fact, only fourteen states established their own healthcare exchange programs. The other thirty-six states refused to build their own exchanges, forcing the federal government to set up the exchanges in those states.
Herein lies a legal issue that has several federal courts divided. The legal question is where the IRS has the authority to offer the tax credits in states where the exchanges were established by the federal government. Provision 36B makes it clear that it’s only for those exchanges established by the states. This has resulted in a number of legal challenges concerning the legality of the IRS tax credits that were already extended to those enrolled in federal exchanges.
Sally Pipes who wrote on Forbes.com sums it up this way:
“Obamacare may be in big trouble, if a recent federal court ruling is any indication.”
“Late last month, a U.S. district court in Oklahoma affirmed that the Internal Revenue Service can only offer tax credits for health insurance plans on state-run exchanges — not federally-operated ones.”
“Earlier this year, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit came to the same conclusion in a similar case, Halbig v. Burwell. The U.S. Court of Appeals for the Fourth Circuit in Richmond, Virginia, disagreed with its colleagues in D.C., siding with the Obama Administration in yet another similar case, King v. Burwell. A federal district court in Indiana has yet to rule on the same question in a case before it.”
“Given the disagreement among these lower courts, there’s a good chance the controversy will end up before the Supreme Court.”
“The federal judiciary should stand firm against the Administration’s appeals. Constitutional principles, legal precedent, and the plain text of Obamacare itself demand it.”
Pipes, President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute, then goes on to cite a number of legal precedents that should undermine the Obama administration’s arguments justifying the IRS offering of tax credits to those individuals from the thirty-six states that use a federal exchange. She concludes:
“In other words, the more controversial the law, the more important it is too closely adhere to the text.”
“Few laws in recent history have been more controversial than Obamacare. The courts should heed these precedents — and common sense — by ruling that Obamacare means exactly what it says.”
If, in fact, this case ends up before the Supreme Court and they rule as Pipes believes they should, several million people may find themselves having to pay back the tax credits they have already received. Additionally, without the tax credits, they would be required to pay the higher premium costs which will undoubtedly force many to cancel their healthcare insurance, leaving more Americans uninsured.