Health policy expert James Blumstein testifies before House subcommittee on ACA implementation

Sep 14, 2012

Health policy expert James F. Blumstein, University Professor of Constitutional Law and Health Law & Policy, testified before the House Ways and Means Committee’s Health Subcommittee in Washington, D.C., on Wednesday, September 12.

Read Professor Blumstein’s testimony.

Blumstein provided testimony regarding the implementation of the Affordable Care Act (ACA) as part of a panel that included health policy makers representing the state of Pennsylvania and industry groups.

“The testimony and questions from committee members mainly centered on whether the Department of Health and Human Services (HHS) was giving enough information to the states, in the form of guidance and rulemaking, to allow them to set up the state exchanges,” said Kevin Cain, Vanderbilt University’s director of federal relations for health and biomedical sciences, who attended the hearing.

In his testimony, Blumstein addressed the legal question of the ACA’s lack of a provision for providing subsidies to individuals through medical insurance exchanges operated by the federal government similar to those provided to income-qualified participants in state medical insurance exchanges.

Under Section 1311 of the ACA, states are authorized to establish an exchange in which persons can shop for medical insurance and insurance companies compete for business. The ACA provides subsidies for persons with incomes in the 100 to 400 percent of poverty range when they purchase insurance on such a state-run exchange. Section 1321 of the ACA requires the federal government to set up an exchange if a state does not set one up, although Section 1321 makes no provision for persons who purchase medical insurance on a federally-run exchange to receive federal subsidies. A rule adopted by the IRS, however, provides for subsidies to income-qualified persons who purchase insurance on either a state-run or a federally-run exchange. Large employers (defined as having more than 50 employees) are substantially penalized if they do not provide appropriate medical insurance and one of their employees receives a federal subsidy.Blumstein Congressional testimony photo2

“The issue affects opportunity for subsidy by residents of states that choose not to establish an exchange,” Blumstein stated in his testimony. Noting that “There is no comparable provision for subsidy for federally run exchanges,” he concluded that the ACA’s statutory design “excludes enrollees on federally run exchanges from receiving subsidies for the purchase of health insurance” and that “the addition of subsidies for…income-qualified enrollees on federally run exchanges triggers a tax/penalty for large employers that do not provide qualified health insurance to their employees.” The ACA’s lack of a provision for subsidies for participants in federally run exchanges, Blumstein testified, thus calls into question the legal authority of the IRS to adopt a rule that provides for federal subsidies for income-qualified persons who purchase insurance through both state run and federally run exchanges.  The IRS rule extends the IRS’s powers of taxation and monetary sanctions in ways that exceed the agency’s authority, Blumstein testified.

In addition to Blumstein’s testimony, the Committee heard testimony from Pennsylvania Insurance Commissioner Michael Consedine; E. Neil Trautwein, vice president of the National Retail Federation’s Employee Benefits Policy Counsel; Daniel T. Durham, executive vice president for policy and regulatory affairs with America’s Health Insurance Plans; and Heather Howard, director of the State Health Reform Assistance Network and a lecturer in public affairs at Princeton University’s Woodrow Wilson School of Public and International Affairs.

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