Politics have been part of the Patient Protection and Affordable Care Act since its passage in 2010. And politics, according to legal experts, stand in the way of fixing a glitch in the law that’s at the center of several lawsuits challenging its legality.
“With a normal, less-polarized law, so many of these issues that have popped up, Congress would go back and fix,” said Iris Tilley, an employment and benefits attorney in Portland, Ore. “But because (the PPACA) is so politically polarized, Congress won’t go back and fix anything. So, you have the executive branch fixing the law through regulation.”
At least four lawsuits are pending at the moment, all aimed at blocking the administration’s response to questions about the law’s tax credits, or subsidies.
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These legal challenges root back to the two types of exchanges envisioned under the law.
The first is the state-established exchange. States that set up their own exchanges are promised federal dollars for subsidies and tax credits to people who have incomes below 400 percent of the poverty line. To receive these dollars, the law twice says they must buy insurance “through an exchange established by the state.”
But under the law, states also were allowed to refuse to establish their own exchanges and default to the federally-operated exchange. Those federally run exchanges, however, were not explicitly included in the language about subsidies.
So far, just 19 states have set up their own exchanges, while 17 others have gone with federal exchanges.
In its effort to address the issue, the IRS issued a rule in May 2012 saying the subsidies would be available through the federally-operated exchanges, too.
One day after the IRS issued its ruling, a group of business owners from six states filed suit. A federal judge recently denied a request from the U.S. Department of Justice to dismiss the suit.
The legal action, Halbig et al v. Sebelius, pits Jacqueline Halbig, an Alexandria, Va., business consultant and senior policy adviser in the U.S. Department of Health and Human Services during the George W. Bush administration, against HHS Secretary Kathleen Sebelius.
Halbig and her co-plaintiffs – all of whom are located in states that have chosen not to set up an exchange – contend the PPACA only allows for subsidies when plans are purchased through state exchanges. Their suit also asserts that the IRS exceeded its legal authority when it issued its rule.