NCPA - National Center for Policy Analysis

No Health Care Tax Credit via Federal Exchanges?

September 9, 2011

Because of a quirk in the new health care law ("ObamaCare"), people who buy health insurance through a federally run exchange may not be eligible for premium subsidies, says Investor's Business Daily (IBD).

  • Government-created exchanges are places for individuals to shop and purchase health insurance.
  • ObamaCare will require individuals and families to buy insurance, starting in 2014.
  • Those with incomes at 100 percent to 400 percent of the federal poverty level will be eligible for a tax credit to help pay for the premium.

But it turns out that the legislation isn't so clear -- the latest example of what analysts predicted would be a stream of surprises from the mammoth health law.

  • Section 1311 of ObamaCare instructs state governments to set up an exchange.
  • If a state refuses, Section 1321 lets the federal government establish an exchange in the state.
  • Yet ObamaCare states that the tax credit is available to people who are enrolled in an "an exchange established by the state under (Section) 1311."
  • It makes no mention of people enrolled in federal exchanges being eligible for the tax credit.

This could be a big problem, as some states probably won't set up and run exchanges.  Governors in Alaska, Florida, Louisiana and Texas have said they won't.  Kansas and Oklahoma have also signaled they won't by returning federal funds meant to be used to establish an exchange.  Other states seem to be dragging their feet.

States could be left with disgruntled residents who can't tap tax credits to help pay for insurance they're forced to buy, says IBD.

Source: David Hogberg, "Oops! No ObamaCare Tax Credit via Federal Exchanges?" Investor's Business Daily, September 7, 2011.

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