Health reform law critics and supporters faced off against each other Aug. 2 in a debate over whether the law allows exchange markets that will likely be set up in most states by the federal government in 2014 to provide crucial subsidies for low- and moderate-income households to buy health insurance.  

At a hearing held by the House Oversight and Government Reform Committee, committee Chairman Darrell Issa (R-Calif.) and Michael Cannon, director of health studies at the conservative Cato Institute, said the Internal Revenue Service acted illegally when it issued a final rule in May that would allow the “federally-facilitated exchanges” to issue advance premium tax credits and cost-sharing subsidies to people earning between 100 percent and 400 percent of the federal poverty level. The Patient Protection and Affordable Care Act only authorizes the subsidies to be issued by exchanges created by states, which was an attempt by Democrats who passed the law in 2010 to spur states to create the online exchange markets, they said.  

Instead, an estimated 30 to 40 states are likely to end up with exchanges established by the Department of Health and Human Services, said Washington and Lee University law Professor Timothy Jost, a supporter of the health care reform law. Under the law, HHS will create exchanges in states that do not do so. Jost testified that the law does allow the federal exchanges to issue the subsidies. The subsidies will help make health insurance plans affordable for people who will be required to buy them under the law, he said.