Obamacare Architect: Govt Intended States to Handle Exchanges

MIT economics professor Jonathan Gruber, one of the original Obamacare authors, said at least two years ago that states that don't offer their own insurance exchanges would not be able to offer residents subsidies to help them pay their premiums.

"In the law, it says if the states don't provide [exchanges], the federal backstop will," reports The Daily Caller, citing a video from a presentation the professor made in 2012.

"The federal government has been sort of slow in putting out its backstop, I think partly because they want to sort of squeeze the states to do it. I think what’s important to remember politically about this, is if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits."

Gruber says the conditional feature for tax credits was added because there were people in Washington who wanted to "squeeze the states to do it," reports Forbes.

In the video, Gruber also says that taxpayers would pressure state officials to create exchanges so they can receive tax credits, and acknowledges the conditional nature alongside a requirement that the federal government establish exchanges within states that do not offer them.

Gruber also explains that the Obama administration might try to ignore that part of the law and admits the tax credits may not be enough of an incentive to get states to comply with forming exchanges.

There has been much confusion over the subsidy issue, with two rulings issued this week. A federal appeals court panel in Washington, D.C., found on Tuesday that people living in states that rely on the federal insurance exchange can't use subsidies to pay for their healthcare plans. Meanwhile, a second ruling, in a Virginia appeals court, found the opposite in a separate case.

Gruber pointed out that the federal government wanted to make states build their own exchanges, or take the blame for keeping their residents from getting subsidies that pay much of their healthcare coverage costs.

"But your citizens still pay the taxes that support this bill," he says in the video. "So you’re essentially saying to your citizens, you’re going to pay all the taxes to help all the other states in the country. I hope that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges, and that they’ll do it. But you know, once again, the politics can get ugly around this."

Many Obamacare supporters, however, say Congress always wanted to provide subsidies through federal exchanges.

Gruber was hired by the Obama administration and worked with congressional staff to draft the Obamacare bill, and suggests that the idea of federal subsidies was not made in error, but was included as incentive for states to create their own exchanges.

And now, The Daily Caller reports, Gruber has called the idea that Congress did not mean to apply subsidies to states that use federally run exchanges "absurd."

Related Stories:

• Subsidies Push True Cost of Obamacare Billions Higher
• Obamacare Rulings Have Consumers, Governors Worried