Nor was this a scrivener's error, as the IRS now claims. It was a conscious choice to increase the pressure on states to set up exchanges. Apparently everyone calculated that, as the Cato Institute put it, the bill would reach state capitals to be greeted as a liberator. As things stand, however, there is real doubt whether the IRS has the power either to issue subsidies in the form of tax credits or to impose penalties on non-conforming employers in the states that say "Thanks, but no thanks." To date, eight states have politely declined, while many more are stalling.
The Cato paper provides a helpful summary for those of us who have forgotten just how contorted the parliamentary shenanigans got:
Congressional Democrats had intended to empanel a conference committee that would merge the PPACA with the “Affordable Health Care for America Act” (H.R. 3962) that had passed the House of Representatives. Had this occurred, the PPACA might look quite different than it does today. But in January 2010, Republican Scott Brown won a special election to fill the seat vacated by the death of Sen. Edward Kennedy (D-MA). Brown’s victory shifted the political terrain. It gave Senate Republicans the 41st vote necessary to filibuster a conference report on the House and Senate bills.
As a result, House and Senate Democrats abandoned a conference committee in favor of a novel strategy. House Democrats agreed to pass the PPACA exactly as it had passed the Senate, but only upon receiving assurances that after the House amended the PPACA through the “budget reconciliation” process, the Senate would immediately approve those amendments. Since Senate rules protect reconciliation bills from a filibuster, the PPACA’s supporters needed only 51 votes to pass the House’s “reconciliation” amendments. The downside of this strategy was that the rules governing budget reconciliation limited the amendments House Democrats could make. Supporters opted for an imperfect bill – that is, a bill that did not accomplish all they may have set out to do, but for which they had the votes – over no bill at all.
The Act signed into law by President Obama and the law that the IRS rule purports to implement — the PPACA — is a hybrid of the two Senate-committee-reported bills, as amended by the Health Care and Education Reconciliation Act of 2010 (HCERA). This history, and the need to resort to the reconciliation process to pass the final law, helps explain why the final legislation looks as it does, and why the Act does not conform with the hopes or expectations of some of its supporters.Normally, if a bill contains a technical glitch, Congress can just fix it . . . . Oh, wait, they don't have the votes any more, do they?