The IRS understood the plain meaning of the Obamacare law

Alex Adrianson highlights on the Heritage Foundation’s “Insider Online” blog some inconvenient facts for those who support the government’s arguments in King v. Burwell.

Did Congress really mean to provide subsidies only for health insurance purchased in state exchanges and not federal exchanges, too? That would appear to be the case judging from the plain meaning of the section that authorizes tax credits for health insurance purchased “through an Exchange established by the State.” One key argument advanced by the government, however, is that “Exchange established by the State” is merely a term of art that includes the fallback federal exchanges. If that were true, then the Internal Revenue Service would be exactly right to make the credits available in all exchanges.

But the agency’s behavior in 2011 suggest it didn’t really believe that. Michael Cannon notes that an early draft of the IRS was faithful to the text of the law, but was later changed when IRS officials realized that fidelity to the text might undermine the goal of broad expanding coverage. Further:

IRS officials recognized that what they wanted to find in the statute simply wasn’t there. In a March 25, 2011, e-mail, Treasury and IRS officials described the lack of authorization for subsidies in federal Exchanges as a “drafting oversight.”

IRS officials also recognized the “apparently plain” language limiting tax credits to state-established Exchanges. Investigators found that a draft of the final rule contained a discussion of this issue that “stated that agencies have broad discretion to reasonably interpret a [law] if the ‘apparently plain statutory language’ is inconsistent with the purpose of the law.” Agency officials dropped that discussion from the final rule shortly before issuing it. …

… If agency officials had understood the phrase was a term of art, then they wouldn’t have needed to ponder the outer limits of executive discretion. And if the phrase had really been a term of art, then why didn’t the agency charged with implementing the law understand that?