On Thursday, Internal Revenue Service Commissioner Douglas Shulman defended his agency's interpretation of the Affordable Care Act's health insurance exchanges and a regulation to provide subsidies to help consumers obtain coverage, The Hill's "Healthwatch" reports (Baker, "Healthwatch," The Hill, 8/2).
The federal health reform law states that the subsidies will be provided to help residents to purchase health policies offered "through an exchange established by the state."
A rule issued by the Obama administration in May permits the subsidies to be used in an exchange administered either by a state or the federal government. The rule did not clarify whether residents in states that fail or decline to establish the exchanges on their own would be eligible to receive the subsidies.
During a House Oversight and Government Reform Committee hearing on Thursday, Rep. Scott DesJarlais (R-Tenn.) and other lawmakers questioned Shulman about the rule and heard testimony from witnesses who argued that the subsidies are illegal.
DesJarlais argued that the IRS exercised "unprecedented power to rewrite a rule and bypass Congress" by allowing subsidies that lawmakers never intended to provide.
He said, "The IRS is actually going between or bypassing Congress, and there's a clear separation of powers issue here," adding, "If people are willing to let the IRS simply write the new tax rules, then I think we're going to have a real problem" ("Healthwatch," The Hill, 8/2).
Shulman responded, "I fully understand that you've got a view on this and that we disagree," adding, "Our legal experts came down on the side that we came out with" (Attias, CQ Today, 8/2).
He added that the suggested risks of the IRS' rule, such as patient data safety being compromised, have been "overstated" (Clark, Government Executive, 8/2). He noted the agency does not intend to reverse itself on the rule ("Healthwatch," The Hill, 8/2).
At the hearing, Michael Cannon -- director of health policy studies at the Cato Institute -- also testified that the ACA limits subsidies to state exchanges. He also reiterated that the IRS rule exceeded its authority and described it as an "illegal tax increase" (CQ Today, 8/2).
However, Timothy Jost, a law professor at Washington and Lee University, defended the IRS rule, saying that the ACA's definition sections, structure and legislative history show that the subsidies can be provided in federal exchanges (CQ Today, 8/2).