Six Words Might Decide Fate of #ObamaCare

At WaPo, "Six words might decide the fate of Obamacare at the Supreme Court":

When the Supreme Court takes up the latest challenge to President Obama’s health-care law this week, how the justices interpret a six-word phrase in the bill could determine its fate.

The law, adopted in 2010, says the federal government can pay subsidies to help people afford insurance bought through “an Exchange established by the state.”

But two-thirds of the states have opted against setting up their own exchanges, and as a result, more Americans have been buying insurance through the federal insurance marketplace. Now, opponents of the law will make their case to the high court that Americans who are not using the state exchanges are ineligible for subsidies. And if they win, insurance premiums could skyrocket and many people might drop their coverage — possibly undermining the whole health-care program.

And as the justices weigh whether the health-care law in fact has a fatal glitch, one of the key questions is this: Why did the Obama administration rule-writing officials in the Internal Revenue Service and its parent agency, the Treasury Department, ultimately interpret the language the way they did?

It had never occurred to the Treasury Department official responsible for making the changes in the tax code required by the law that there was more than one way to read the phrase — until she happened across an article in a trade journal.

Emily McMahon, deputy assistant treasury secretary for tax policy, read an article in Bloomberg BNA’s Daily Tax Report in January 2011 raising questions about whether federal subsidies could be paid for millions of Americans buying insurance under the Affordable Care Act, according to Treasury Department officials. The issue was whether the law allowed these payments if the coverage was bought in states that did not set up their own insurance marketplaces.

So McMahon called a meeting with two of her top lawyers, one of them recalled, and asked whether there was “a glitch in the law we needed to worry about.”

In the end, the Treasury and IRS officials who wrote the rules adopted the more expansive reading of the law — allowing subsidies for all marketplaces — because they concluded this was required for the new health-care initiative to succeed, according to current and former agency officials and documents they provided to congressional investigators. And, the officials reasoned, Congress would not have passed a law that it wanted to fail.

“Nobody I talked to in government, including many people involved in the legislative process, thought this was a question,” recalled David Gamage, a tax law professor at the University of California at Berkeley hired to help the Treasury Department’s Office of Tax Policy implement the law. “Nobody thought the argument [limiting the subsidies] was persuasive.’’

While it was clear to the rules’ authors at Treasury and the IRS that the issue was a practical matter and not a political one, they met regularly with White House officials, who were closely monitoring the drafting of the regulations, two former officials said.

And while the team of tax attorneys had no doubt that the subsidies should apply to all marketplaces, there was a significant debate inside Treasury and the IRS about how much of their reasoning should be spelled out in public. The agency was sensitive to the legal and political minefield it was navigating...

Still more.