Several states have committed to operating their own health insurance exchanges, but it seems increasingly likely that others will have an Affordable Insurance Exchange operated by the federal government. A key aspect for making exchanges successful is that those who qualify will be able to access federal tax credits when they buy private plans through an exchange, whether it’s a state or federally-facilitated exchange.
Some observers, though, have argued that the Affordable Care Act does not authorize the payment of federal tax credits to individuals and families who enroll through a federally-facilitated exchange. Can this be true?
The agency responsible for paying the federal tax credits—the IRS—says this is not the case. In its final regulations defining how the tax credits will work, the IRS clearly states that the credits will be available in all types of exchanges—those run by a single state, any that emerge as multi-state partnerships or cover sub-state areas, and federally-facilitated exchanges. The rule states:
The statutory language of section 36B and other provisions of the Affordable Care Act support the interpretation that credits are available to taxpayers who obtain coverage through a State Exchange, regional Exchange, subsidiary Exchange, and the Federally-facilitated Exchange. Moreover, the relevant legislative history does not demonstrate that Congress intended to limit the premium tax credit to State Exchanges.
As the IRS observes, providing tax credits to the residents of some states but not offering them in others was never something that came up as the ACA was debated and passed by Congress over the course of many months.
While the stance of the agency that will write the checks is enough for me, for additional legal analysis of this question, see law professor Tim Jost’s post on the topic on a Seton Hall School of Law blog. Judy Solomon at the Center on Budget and Policy Priorities has also written an excellent paper on this topic.