ObamaCare architect explained in 2012 video why only state exchanges pay subsidies

This week, Jonathan Gruber appeared on MSNBC to assert that the DC Circuit appellate court got the ObamaCare statute all wrong in its Halbig decision. Gruber, one of the key architects of the ACA and of the Massachusetts “RomneyCare” law that preceded it, insisted that the state exchange requirement for subsidy payment was purely accidental. “It is unambiguous this is a typo,” Gruber told Chris Matthews. “Literally every single person involved in the crafting of this law has said that it`s a typo, that they had no intention of excluding the federal states.”


Two years ago, though, Gruber gave a much different explanation for this part of the ObamaCare statute. Speaking at a January 2012 symposium for a tech organization that this was no typo. It was, Gruber said, a deliberate policy to twist the arms of reluctant states to set up their own exchanges — and that a failure to do so would mean no subsidies for their citizens. Peter Suderman at Reason and William Jacobson at Legal Insurrection immediately grasped the significance of this contradiction:

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—but your citizens still pay the taxes that support this bill. 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 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. But, you know, once again the politics can get ugly around this. [emphasis added]

Suderman gives the context of Gruber’s remarks:

Jonathan Gruber, a Massachusetts Institute of Technology economist who helped design the Massachusetts health law that was the model for Obamacare, was a key influence on the creation of the federal health law. He was widely quoted in the media. During the crafting of the law, the Obama administration brought him on for consultation because of his expertise. He was paid almost $400,000 to consult with the administration on the law. And he has claimed to have written part of the legislation, the section dealing with small business tax credits.

After the law passed, in 2011 and throughout 2012, multiple states sought his expertise to help them understand their options regarding the choice to set up their own exchanges. During that period of time, in January of 2012, Gruber told an audience at Noblis, a technical management support organization, that tax credits—the subsidies available for health insurance—were only available in states that set up their own exchanges. …

And what he says is exactly what challengers to the administration’s implementation of the law have been arguing—that if a state chooses not to establish its own exchange, then residents of those states will not be able to access Obamacare’s health insurance tax credits. He says this in response to a question asking whether the federal government will step in if a state chooses not to build its own exchange. Gruber describes the possibility that states won’t enact their own exchanges as one of the potential “threats” to the law. He says this with confidence and certainty, and at no other point in the presentation does he contradict the statement in question.

So is this a smoking gun in the Halbig case? Politically — yes. Legally? It certainly undermines one argument used by the administration to defend payment of subsidies through the federal exchanges, but it may not be entirely dispositive. What matters here is Congressional intent, not Gruber’s, to the extent that the statute itself appears ambiguous. The actual text of the law supports Gruber’s 2012 position, as both the DC and 4th Circuits found in their opposing rulings, but the 4th Circuit couldn’t quite believe that Congress intended to shaft Americans in states that didn’t set up their own exchanges. That might have changed had they heard from the 2012 version of Gruber.

Will this be enough at the Supreme Court to demonstrate that there was a rational reason for Congress to make the distinction in the law and force the court to adopt the DC’s Halbig decision? You’d have to ask Anthony Kennedy and John Roberts that question. And I’d say the odds are good that they’ll be asked it relatively soon.

Here’s the entire Nobilis presentation, in case anyone worries that this got taken out of context. The relevant remarks come at the 31-minute mark.