The Watercooler ~ If Courts Overrule IRS "Regulation," Obamacare Collapses

Another aspect of the poorly written Affordable Care Act is rapidly moving through the courts and could be the final blow causing the flimsy house of cards to come tumbling down.

Now that some of the dust has settled and states have made their decisions regarding whether or not to set up their own exchanges, the issue at hand is coming to a head:

The Affordable Care Act proposes to make health insurance affordable to millions of low-income Americans by offering them tax credits to help cover the cost. To receive the credit, the law twice says they must buy insurance “through an exchange established by the state.”

But 36 states have decided against opening exchanges for now. Although the law permits the federal government to open exchanges instead, it does not say tax credits may be given to those who buy insurance through a federally run exchange.

In other words, the law specifically states that the tax credits may be given to states that open their own exchanges and not to federally run exchanges.

Not to concern itself with the actual wording of the law, however, the IRS decided to issues its own executive order of sorts, essentially changing the original meaning of the text of the law:

Apparently no one noticed this when the long and complicated bill worked its way through the House and Senate. Last year, however, the Internal Revenue Service tried to remedy it by putting out a regulation that redefined “exchange” to include a “federally facilitated exchange.” This is “consistent with the language, purpose and structure … of the act as a whole,” the Treasury Department said.

But, not so fast, IRS…

But critics of the law have seized on the glitch. They have filed four lawsuits that urge judges to rule the Obama administration must abide by the strict wording of the law, even if doing so dismantles it in nearly two-thirds of the states. And the Obama administration has no hope of repairing the glitch by legislation as long as the Republicans control the House.

This week, U.S. District Judge Paul Friedman in Washington, a President Clinton appointee, refused the administration’s request to dismiss the suit. Instead, he said the challengers had put forward a substantial claim, and he promised to issue a written ruling.

Should the plaintiffs prevail on this one, and it would require more Justice Roberts jujitsu to rule against them, the old adage that there is more than one way to skin a cat would certainly apply here.

The Watercooler is always an open thread.