UPDATE – As of February 19, 2015, the Obama administration had sent the wrong tax forms to approximately one-fifth (800,000) of those who received subsidies through healthcare.gov. Approximately 50,000 had to resubmit their returns, and others were asked to wait. Refunds were delayed as a result.

April 2015 – From a hot and dirty brow, drops of sweat fall and hit a chalky white line. From a clay-dusted base, shuffling feet lead off and on again. Then wildly stolen strides, billowing dust, and a crashing skid change the game.

What a magnificent feat it was for the White House when Obamacare slid into home plate on March 23, 2010. But we are not talking about baseball, and the crowds are not cheering. This is real life, and real people are being affected.

How it happened
Before Obamacare could land on President Barack Obama’s desk and become law, identical versions would have to pass both houses of Congress. The House of Representatives required a simple majority of 51%, and the Senate needed a supermajority (60%) to avoid a Republican filibuster.

A government-run health care system had been a pet crusade of the Democratic Party for decades, so securing passage by the 77% Democratic House would be a fairly easy task.

But the Senate was one Democrat shy of 60 – the coveted golden number. In April 2009, that gap was filled when Senator Arlen Specter of Pennsylvania switched from Republican to Democrat.

Meanwhile, as the threat of Obamacare’s passage towered overhead, the American people pushed back with a historic degree of outcry. Polls reported public support averaging only 39%.

Still, the political machine went into full operation to guarantee 100% of the Democratic vote. Pressure, kickbacks, and bribes were all pulled out of the hat to sway moderate Democrats whose support had begun to fall by the wayside. Sen. Ben Nelson (D-NE) and Sen. Mary Landrieu (D-LA) were offered Medicaid exemptions or funding that guaranteed tens and hundreds of millions of dollars for their states, respectively. Both capitulated, and the voice of the people was silenced.

The Senate moved quickly and passed Obamacare with exactly 60 votes while Americans were quietly celebrating Christmas Eve with their families.

Then the unexpected happened. Just days later on January 19, 2010, Republican Scott Brown took the Massachusetts Senate seat left open by the death of Ted Kennedy (D-MA). Brown ran on a vow to vote against Obamacare, and he won. The Senate supermajority was lost.

Why does this matter? The Democrats had planned to continue tweaking the language to get what they wanted. But now, the Senate would be unable to pass the revised bill. This was a disaster for Democrats. After all the maneuvering and backroom deals, they had to find another way – a loophole of sorts.

They moved forward with a twofold process. The Democrat-controlled House agreed to pass the Christmas Eve Senate bill as written. And they simultaneously began crafting a second bill to amend the first.

They planned to push it through as a “reconciliation bill.” The rules of the Senate allow passage of reconciliation bills with a simple majority (51% instead of 60%) and limited debate. This exception was designed to simplify the process for hashing out budget items, not for policy making of any kind – especially not comprehensive legislation such as health care.

Even so, the monstrosity that may be the most significant regulatory overreach in U.S. history slid through the Senate approval process as if it were a mere “budget item.” To put it simply, they cheated.

The first bill was signed into law March 23, 2010, and the second was signed by President Obama seven days later. The two together are what we refer to as Obamacare, or the Affordable Care Act.

Penalties and clawbacks
It would take months or years of research and a topical series of books to dissect the intricacies and failings of the Obamacare law and its 20,000 pages of regulations. But for now, we’ll focus on the immediate effects on the low to lower middle income American taxpayer this tax filing season.

For the first year in history, Americans were forced by law in 2014 to purchase health insurance or enroll in government coverage. Those who did not comply must now pay a penalty, sometimes called a fee or a tax. The IRS calls it a “shared responsibility payment.”

Over eight million signed up for coverage through Obamacare in 2014. And although about 85% of them qualified for federal subsidies to offset their payments, many felt the coverage available to them was still unaffordable. And countless numbers decided the high-deductible plans were useless to them. Such a conclusion has proven true by a Gallup poll reflecting an increased number (33%) of covered Americans putting off serious medical treatment because of cost in 2014 – the highest percentage in 14 years of polling.

As a result, the U.S. Treasury reported in late January that as many as six million Americans would be paying a penalty for not having health insurance this tax filing season. The penalties are scheduled to increase significantly over the coming years. (See chart on P. 19.)

Of the 6.8 million who received Obamacare subsidies, many are being hit by an unwelcome surprise. According to the Wall Street Journal, nearly half are now required to pay back an average of $208 to the federal government because of incorrect income estimates. The funds originally sent to the individual’s chosen health plan are seized from the enrollee’s tax refund in what’s called a “clawback.”

A way out
Obamacare could completely unravel by early summer if the Supreme Court rules in favor of King in the King v Burwell case. The lawsuit challenges the IRS for its complete disregard of the law, which clearly stipulates tax credits/subsidies can only be issued through state exchanges.

An “exchange,” sometimes called a “marketplace,” “portal,” or “feeder system,” is simply a website where individuals apply for Obamacare by entering a great deal of personal information. From there, the private health and financial data is sent to the Federal Data Services Hub, essentially the central server of this online system of websites. The information is shared with various federal bureaucracies to verify the individual’s eligibility for coverage and tax credits. The hub then transmits the eligibility determination or denial back to the website, allowing the person (if eligible) to choose a level of Obamacare coverage or be enrolled in Medicaid. (See graphic on P. 19.)

The Obamacare legislation was written with the expectation that each state would operate and fund its own exchange. Congress appropriated unlimited funds for that purpose until December 31, 2014, presumably so Obamacare would appear more like a state initiative than a federal takeover. But 36 states refused funding, and one more failed in its efforts to successfully establish a state exchange.

That left a total of only 13 state exchanges and one in the District of Columbia. But millions have received subsidies in the remaining 37 states directly through the federal exchange, healthcare.gov.

A Supreme Court decision is expected by the end of June. “Members of Congress are worried that the Supreme Court will rule in favor of King – and even Democrats and the administration are pretty sure they will,” Twila Brase, president of Citizens’ Council for Health Freedom, told AFA Journal. The secretary of the Treasury would then be required to implement the change ordered by the Supreme Court within 25 days. Suddenly the IRS will no longer be able to give subsidies to about 4.6 million people in those 37 states.

“A win for King will mean freedom from the law’s employer mandate and its penalties, and it means freedom from the individual mandate and its penalties for most people in the 37 states, “ added Brase. “Congress should focus on talking about how many people will win back their freedom, not on how many people will lose subsidies they should never have received.”

If Congress panics and quickly moves to amend the law to legalize the illegal subsidies, Republicans will then be helping the president expand Obamacare, providing it to more people and increasing the costs for taxpayers. Such a decision would also be a slap in the face to the majority of Americans who see the dangers of government-run health care and want Obamacare repealed.

Congress will need to be ready with alternative legislation in the fallout. A number of alternatives have already been offered by Republicans – examples include a plan released by Louisiana Governor Bobby Jindal and another by Senators Hatch (R-UT), Burr (R-NC), and now-retired Senator Tom Coburn (R-OK).

The Republicans sent a clear message on February 2, 2015, when the House voted to repeal Obamacare. This is their chance to actually do it.  

Act now – Call your governor, U.S. Senators for your state, and your U.S. Congressman. Tell them you are expecting a plan of action to ensure freedom from the mandates and penalties after the Supreme Court rules in favor of King.

Changing the Obamacare law to legalize federal exchanges would:

▶ Set a disastrous precedent by allowing the president to act illegally to push an agenda, only to be ratified by Congress after the fact.
▶ Remove the rights and freedoms of approximately 55 million employers and individuals in the 37 states that refused state exchange funding and corresponding federal control. (See map to determine if that includes your state.)
▶ Further entrench Obamacare into federal law, the lives of American people, and the nation as a whole.

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More information

Twila Brase
Citizens’ Council for Health Freedom
161 St. Anthony Avenue, Suite 923
St. Paul, MN 55103
651-646-8935
[email protected]

Twila Brase is a regular monthly guest on American Family Radio’s Financial Issues daily radio program.