CBPP and Cato papers examine tax subsidy availability
Posted on July 19, 2012 | No Comments
The Affordable Care Act (ACA) provides tax credits and subsidies for the purchase of qualifying health insurance plans on state-run insurance exchanges.
According to a paper recently released by the Cato Institute, the Internal Revenue Service (IRS) rule that extends tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own, lacks “statutory authority. The report argues that the” text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges” and that the IRS rule is thus “contrary to congressional intent and cannot be justified on other legal grounds.”
However, an article published by the Center on Budget Policy and Priorities (CBPP) takes a different perspective. In providing for a federal exchange, CBPP argues, the Congress intended that it substitute for a state exchange. The CBPP article makes the case that one of the primary functions of an exchange is to determine eligibility for, and the amount of, advance premium tax credits so that people can afford to buy coverage. CBPP cites section 1321 of the ACA and section 36B of the Internal Revenue Code as evidence regarding this point. Even if the statute were ambiguous, CBPP argues, a court examining whether the Treasury regulations are valid would defer to the agency’s interpretation of the statute.