Obamacare Architect: States Without Exchanges Get No Subsidies

Jonathan Gruber, a “key architect” of  Obamacare was caught on tape in 2012 saying states which do not set up an Obamacare exchange are not eligible for subsidies. His admission mirrors the arguments of plaintiffs in the Halbig case and has the potential to push Obamacare to the brink of collapse.

This week there were two circuit court decisions about Obamacare subsidies. A three judge panel of the D.C. Circuit ruled that the precise language indicated people who bought insurance on the federal exchange were not eligible for subsidies. Hours later the 4th Circuit ruled the opposite, saying that the precise language was unclear but that the law’s drafters nevertheless intended to offer subsidies to everyone. Many observers believe the two cases are eventually headed to the Supreme Court.

Supporters of the law have argued that the bill was poorly drafted. They claim the apparent limitation of federal subsidies to state-based exchanges was merely a legislative typo. And since it was a typo, they argue, courts should look to the intent of the lawmakers. Some of them may want to retract that argument now.

Rich Weinstein, a commenter at the Volokh Conspiracy blog, pointed out a 2012 video of Obamacare architect Jonathan Gruber stating unequivocally that subsidies are not available in states which do not set up their own exchanges. Here’s the clip (hat tip to Reason‘s Peter Suderman for highlighting the video) followed by a transcript of the relevant portion.

Q: The health information exchanges for the states and it’s my understanding that if states don’t provide them that the federal government will provide them. 

Gruber: Yeah, so these health insurance exchanges…will be these new shopping places and they’ll be the place that people go to get their subsidies for health insurance. In the law it says if the states don’t provide them then the federal backstop will. The federal government has been sort of slow in putting out its backstop I think partly because they want to sort of squeeze the states to do it. I think what’s important to remember politically about this is if you’re a state and you don’t set up an exchange that means your citizens don’t get their tax credits. But your citizens still pay the taxes that support this bill. So you’re essentially saying to your citizens, you’re going to pay all the taxes to help all the other states in the country. I hope that that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges and that they’ll do it, but you know once again the politics can get ugly around this.

This is exactly what plaintiffs in the Halbig case argued, i.e. that limiting subsidies to state exchanges was intended to pressure states into setting up exchanges. And if that’s true then the way the legislation was drafted was intentional, not a typo.

If enough judges (or more likely Justices) agree with Gruber’s assessment, subsidies could be dropped from the federal exchange. And that could effectively put an end to Obamacare as most of the country becomes ineligible for federal money to cover the bulk of their premiums. In addition, it would put an end to mandates designed to force people into the system.

Given the amount of time and energy the President and the left has invested in this, they are not about to admit defeat and let this collapse. Things are about to get very interesting, very fast.

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