New research about implementation of the Affordable Care Act finds that Obama administration regulations are allowing taxpayer subsidized health insurance for some people earning less than the statutory income floor and also for unlawful immigrants.
A new study by Andy S. Grewal, an associate professor at the University of Iowa College of Law, explains that the ACA provides tax credits to U.S. citizens with incomes between 100 and 400% of the Federal Poverty Level (FPL). However, IRS regulations were written to extend credits to citizens below 100% FPL in some cases.
Also, Section 36B of the ACA grants credits to some non-citizens with low-incomes only if they are themselves lawfully present in the U.S. and cannot obtain Medicaid coverage. IRS regulations, however, contradict the statute and allow subsidies if “the taxpayer or a member of the taxpayer’s family is lawfully present in the United States,” and “the lawfully present taxpayer or family member is not eligible for the Medicaid program.”
The regulations were issued on August 17, 2011, but the discrepancy between the law and the regulations was carefully documented in a post by Grewal on Bloomberg BNA, “Lurking Challenges to the ACA Tax Credit Regulations.”
“A Treasury regulation that extends premium tax credits to individuals whose household incomes fall below the floor established by Section 36B(c)(1)(A) lacks statutory authority,” Grewal concludes. “Another Treasury regulation that extends those credits to some unlawful aliens suffers from a similar infirmity.”
He highlights “the pitfalls associated with Treasury’s failure to recognize limits on its administrative authority.” That is the core issue before the U.S. Supreme Court in King v Burwell where King et al are challenging an IRS rule that allows tax credits to flow through federally-facilitated health insurance exchanges, contrary to the language of the statute which allows the credits only through state exchanges.
Only to people earning between 100 and 400 percent of FPL are eligible for premium tax credits under the ACA, but Treasury extended the definition in its 2011 rule to also allow credits for those whose income falls below 100 percent. Further, “These taxpayers are generally given larger credits than are given to those who actually meet the statutory criteria,” Grewal writes.
And taxpayers who get a larger subsidy than they were due because they mis-estimated their income do not have to repay the money. “The regulation allows a taxpayer to fully keep her tax credits even if, at the close of the taxable year, the taxpayer’s household income did not meet the statutory floor and the taxpayer was not entitled to any credits.”