The Wisdom of States Not Implementing ObamaCare Exchanges

Bill Clinton (US Dept. of Labor photo)

Bill Clinton (US Dept. of Labor photo)

“Not cooperating means the states’ taxpayers will pay for this and the money will to go someone else, somewhere else.”

That was former President Bill Clinton’s take on 27 states that are not implementing state exchanges under the new health care law, speaking at his presidential library. He accused them of “leaving money on the table,” as if they were somehow missing out on something. Yet, if anything, not implementing the exchanges is saving these states money.

Under the law, states that do not set up their own exchanges will simply default to a federal exchange operated by the Department of Health and Human Services based in Washington, D.C. It will make no difference in actually implementing the law. Insurance subsidies will still be dispensed via the federal exchanges, just not with the state’s assistance.

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Apparently, like many members of Congress, Clinton did not read the law either.

There is another advantage to states that opted not to establish their own exchanges. They may have given the legal standing to businesses in those states to fight the job-killing employer mandate.

According to a July 2012 study by Case Western Reserve University School of Law’s Jonathan Adler and the Cato Institute’s Michael Cannon, “Taxation without representation: The illegal IRS rule to expand tax credits under the PPACA” a federal exchange that would be implemented in the stead of a state exchanges  “lacks statutory authority” to dispense the insurance subsidies.

pq20130906In the study, Adler and Cannon make the case that “An Internal Revenue Service (IRS) rule purports to extend these tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own.”

The problem, according to Adler and Cannon, is that the “text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges. The IRS rule is contrary to congressional intent and cannot be justified on other legal grounds.”

This creates a real problem legally for the Obama Administration in states that a federal exchange is implemented. By not implementing the state exchange, governors such as Rick Perry in Texas are effectively giving employers in those states the standing to sue against the new IRS rule.

With all due respect to Clinton, nobody’s leaving any money on the table. The decision over state exchanges and Medicaid expansion for that matter is about whether states are going to assist in the implementation of Obamacare or not.

On that count, the federal government will enforce the law whether the states like it or not. At least by not cooperating, these 27 states are creating an avenue to fight the law in court. It’s worth a shot, particularly, so long as Congress continues to fund Obamacare. This may be the only way the American people ever get rid of it.


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Robert Romano is the Senior Editor of Americans for Limited Government (ALG) News Bureau. Americans for Limited Government is a non- partisan, nationwide network committed to advancing free market reforms,private property rights and core American liberties.
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