Obamacare's Fatal Flaw; the State Exchanges Undermine the Health Care Scheme

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For good reason the Internal Revenue Service is one of the most despised government agencies, and it's more unpopular than ever. A Fox News poll finds that 84 percent of those responding were concerned about the agency's abuse of power. It's only going to get worse.

Obamacare requires states to establish health care exchanges by Jan. 1, 2014. These bureaucratic creations are meant to offer highly regulated health plans carrying the administration's seal of approval. This is a central element of how Obamacare works: Individuals who obtain health insurance through a state exchange qualify for federal subsidies and tax credits. The availability of subsidies is the basis of the employer mandate.

The text of the health care law unambiguously says that a state must set up the exchange to enforce the tax credit and the mandate penalty. The federal government can create a federal exchange, but the plain language of the statute clearly says the mandate penalty and associated tax credits apply only to state exchanges. A new lawsuit argues that this puts the 33 states that chose not to establish state exchanges off the Obamacare hook.

To get around this difficulty, the IRS unilaterally declared Obamacare's tax provisions applicable to the federal exchange. …