In 2011, one of the most influential conservative organizations in Washington D.C. flatly contradicted the central claim in a lawsuit seeking to gut the Affordable Care Act. Though Heritage later reversed its previously stated views on how to read Obamacare after it became advantageous for conservatives to publicly agree with the plaintiffs in this lawsuit, Heritage’s 2011 paper adds to the wealth of evidence showing that the misreading of the law offered by the plaintiffs in this lawsuit was widely rejected by the law’s supporters and by its opponents until the lawsuit itself gave conservatives an incentive to lend credibility to its central claim.
The core claim in King v. Burwell, is that tax credits intended to help people pay for their health insurance are unavailable in most states. Though the Affordable Care Act gives states “flexibility” to decide whether to set up an “American Health Benefit” (AHB) exchange, where individual can buy subsidized health plans, or to allow the federal government to set up such an exchange for them, the plaintiffs in King allege that the law was not designed to give states flexibility at all. Rather, they claim that states that elected to have the federal government set up their exchange forfeited their share of hundreds of billion of dollars worth of tax credits.
A Heritage white paper entitled “A State Lawmaker’s Guide to Health Insurance Exchanges” rejects this reading of the law. According to that paper, “whoever controls the AHB exchange,” tax credits will be available.
The paper, which is authored by a Heritage staffer the organization describes as “[a]n expert in health care policy and markets,” correctly explains that the Affordable Care Act “effectively gives state governments a ‘right of first refusal’ to design and operate AHB exchanges within federal guidelines.” It then suggests that state lawmakers could set up their own exchanges as a “defensive” measure against an increased federal role in their state.
One of Heritage’s arguments in favor of such a “defensive” tactic is that, should a state opt to have the federal government operate their exchange, federal officials could gain additional control over the state’s Medicaid program. Yet, in arguing this point, Heritage also concedes that both state and federally-run exchanges are permitted to provide tax credits to consumers. As Heritage explains, “whoever controls the AHB exchange becomes the de facto gatekeeper for both the state’s Medicaid program and the new federal subsidy system.”
It would be impossible for the federal government to be the “gatekeeper” for a federal subsidy system that does not exist, as the King plaintiffs argue it does not in states with federally-run exchanges.
(HT: Twitter user @CethEslick)
The date of the Heritage white paper, March 2011, is worth noting. That’s months before the IRS proposed a rule that agreed with Heritage that tax credits are available in all 50 states, and more than a year before that rule was finalized.
As late as October of 2013, Heritage published another piece entitled “State-, federal-run exchanges would have same effect.” That piece explains that people in the exchanges “will get the same level of federal subsidy for exchange coverage regardless of who runs the exchange.”