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GOP questions legality of Obamacare subsidies

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The House's top investigators Wednesday accused the Obama administration of illegally trying to paper over the flaws in the new health care law, saying the president and his aides are going beyond their powers to cover up for the fact that so many states have rejected federally run exchanges.

It follows similar charges from early July, when President Obama announced he was unilaterally delaying the Affordable Care Act's employer mandate for a year — a move both Republicans and Democrats questioned whether he had the power to make.

Rep. Darrell E. Issa, California Republican and the chairman of the House Committee on Oversight and Government Reform, said the administration is "stonewalling" his attempts to figure out why the Treasury Department interpreted the law in the way it did.

The exchanges, where Americans without employer-based insurance will buy coverage through premium tax credits, will start to enroll consumers in all 50 states and the District of Columbia on Oct. 1 for health coverage that takes effect in January.

The law says subsidies should be doled out to any exchange "established by the State."

But the administration did not count on more than half of the states defaulting to federally run exchanges, and the extension of subsidies to federally run exchanges will add "hundreds of billions" in spending dollars that were not authorized by Congress, said Rep. James Lankford, Oklahoma Republican who led a hearing on the issue Wednesday before the oversight committee's energy policy, health care and entitlements subcommittee.

The debate looms as one of the biggest legal challenges to the rollout of the health law's exchanges, targeting a centerpiece of the plan to extend insurance coverage to tens of millions of Americans.

Oklahoma Attorney General E. Scott Pruitt and a coalition of small business owners in states that deferred to a federal exchange have sued the administration, saying their states had the right to reject the subsidies.

"When Congress passed the health care act, they provided states a choice," Mr. Pruitt testified.

Emily S. McMahon, the deputy assistant Treasury secretary for tax policy, said the administration interpreted the law in a way that is consistent with its overall purpose — to insure millions of Americans.

"We did not find any evidence in our review of the legislative history that there was any intent to exclude the federal exchanges from the scope of the premium tax credits," she testified.

Democratic lawmakers said there is no way the authors of Obamacare would let some states be treated differently than others. Yet Republicans insist the Obama administration is circumventing the letter of the law to polish up the overhaul's flaws.

Mr. Issa threatened Wednesday to subpoena emails that detail the Treasury's thinking before it issued its regulations.

"You were pretty close to a useless witness who came saying, 'I don't know,'" Mr. Issa told Ms. McMahon.

Mr. Pruitt said if the subsidies are extended to his state, businesses will eventually be exposed to penalties under the law's employer mandate.

The White House announced July 2 it planned to delay by one year, to 2015, the provision that requires employers with 50 or more full-time workers to provide health insurance or pay fines. Since the fines kick in when at least one employee takes advantage of the exchange's subsidies, Mr. Pruitt said the extension of tax credits to federally run exchanges could harm companies in his state.

Subcommittee ranking member Rep. Jackie Speier, California Democrat, said if Mr. Pruitt were to prevail in court, "all he would achieve is making insurance unaffordable to more than 300,000 Oklahomans."

"The law is working," she said, "and maybe that is what the opponents are afraid of."

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