Subsidies for Federal Exchanges: The Biggest Executive Usurpation of All?

There have been so many unilateral changes made in the Affordable Care Act–in which the executive branch usurps the powers of the legislature–that bringing up one more may seem boring. But this may have been the most outrageous of them all and it has received the least attention. Michael Cannon writes an editorial on the Fox News site that the law never allowed subsidies for those who bought insurance through Federal exchanges. The law only authorized such spending for the state exchanges.

Confounding supporters’ expectations, 34 states declined to establish Exchanges. Under the plain terms of federal law, subsidies are therefore available in the 16 Exchanges established by states, and not available in the 34 Exchanges established by the federal government.

In 2011, however, the Obama administration unilaterally announced it would force taxpayers to subsidize insurance purchased through federal Exchanges as well. It cited no statutory authority for its decision, and has stubbornly refused to follow its own law despite immediate and sustained criticism

In January of this year, the Obama administration began spending billions of dollars of unauthorized subsidies to induce Americans to enroll in the 34 Exchanges established by the federal government. The president is literally forcing taxpayers, without any legal authorization, to subsidize two out of every three Exchange enrollments. 

Spending by the executive, with no legislated statute that authorizes that spending, is plainly illegal.

It is also being fought in court through several lawsuits. In defending themselves, the Obama Administration is now at least articulating a basis in the law for claiming the authority to give subsidies. They claim that they are justified because of “a system of nested provisions that when you walk through them lead to the conclusion that the federal Exchange stands in the place of a state exchange.” But this cannot change the fact that the federal Exchanges are not authorized according to the language of the law.

Last month, one of those lawsuits – Halbig v. Sebelius – went before a skeptical three-judge panel of the D.C. Circuit.


Judge Thomas B. Griffith, a George W. Bush appointee considered the panel’s swing vote, somewhat comically forced the administration to admit the tautology that an Exchange established by the federal government is not “established by the State.” He then explained, “the key language is who establishes the Exchange, and you just keep coming back to well, the Secretary establishes it.”

It seems too good to be true to suppose that a court decision could still destroy the Affordable Care Act. But it is certainly a logical possibility.