What if the Supreme Court strikes down Obamacare subsidies in states that lack their own exchange?

Sean Parnell of the Heartland Institute’s Health Care News asks that question in a National Review Online column, then offers an answer that would lead to an important reform of the Affordable Care Act.

It’s easy to predict how President Obama and his allies will react if the Supreme Court rules against their expansive interpretation of Congress’s intent and declares that the law should be administered as written. They will bludgeon Republicans for months or years for “taking away health care from millions of Americans,” even though the truth is that it’s entirely the fault of the Democrats who hastily passed and signed the law without reading it — not a single Republican voted for it.

This firestorm will put intense pressure on Congress and on Republican governors and state legislators to rewrite the law to Obama’s liking or to create state exchanges where they haven’t been established. To avoid this demagoguery, Congress should pass legislation authorizing tax credits in states that don’t set up exchanges. But here’s the catch: While making the tax credits available to everyone in states with federal exchanges, they should not be made available through the federal exchanges. Nor should those credits be based on the current convoluted formula that gives aid to some people while leaving others out.

Instead, Republicans should pass legislation that gives tax credits along the lines they have long proposed, allowing anybody who buys insurance in the individual market to get a credit toward the cost, avoiding the federal exchange and all the cumbersome bureaucracy and mandates that come with it.

Several such proposals have already been offered. The 2017 Project proposes tax credits based on age. Those under age 35 would receive a $1,200 tax credit, those over 50 would receive a $3,000 tax credit, and those in between would receive $2,100. The concept is straightforward: Give people a tax credit — in the form of an IRS refund — for buying health insurance, and then get out of the way.

Congress would have to do more than just give tax credits, of course. The legislation should also repeal the law’s benefit mandates, which, for example, require 61-year-old women to pay for maternity coverage. This will lower insurance costs and make those tax credits go much further.

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