Tax Credit Issue Under ACA in Federally Affiliated Exchanges

In the aftermath of the historic Supreme Court decision upholding the constitutionality of the Affordable Care Act (ACA), one resulting legal dispute concerns whether tax credits will be available to otherwise eligible citizens in states which choose to have the federal government rather than the states themselves operate the required exchanges.  In a thoughtful article by Timothy Jost, a law professor at Washington and Lee University School of Law, the issue is well articulated and analyzed.  Professor Jost notes that in defining who is eligible for tax credits, the ACA refers to persons “enrolled in {a qualified health plan} through an Exchange established by the State under section 1311.” However, he concludes that the legislative history of the ACA as well as other language eventually added to the ACA “supports the interpretation of the statute adopted by the IRS.”  The final rules promulgated by the IRS make premium tax credits available through federal as well as state exchanges.  Opponents of the IRS rules argue that the rules are unauthorized by the ACA.  Professor Jost argues that “the entire structure of the ACA depends on premium tax credits being available in all states.” 

In the somewhat related issue of whether states will opt to extend Medicaid coverage under the ACA after the Supreme Court ruled that states can choose not to participate in the expansion called for in the ACA, U.S. Department of Health and Human Services Secretary Kathleen Sebelius, in a letter dated July 10, 2012 to a number of governors stated, “As to the very small number of affected individuals who would not qualify for the statutory exemption {from the individual responsibility provision of the ACA}, Congress provided additional authority, which we intend to exercise as appropriate, to establish any hardship exemption that may be needed.”