When the Supreme Court issued its opinion in The State of Florida v. Sebelius it appeared that the ACA was the law of the land and that implementation would proceed absent a successful legislative appeal. That decision found that while the ACA was not constituional as an exercise of Congress' power under the Commerce Clause, it was consitutional under the plenary power of Congress to tax. One of the lesser noticed portions of the opinion, however, did include the Court's invalidation of that part of the ACA which purported to withdraw Medicaid Funding to those states that refused to expand access to Medicaid in accordance with the goals of the ACA. Many states are thus refusing to expand Medicaid coverage based on their perception that future funding of medicaid might need to be curtailed leaving the state holding the bag for its expanded medicaid rolls covering persons at 400% of the poverty level. In addition, implementation of the non-medicaid portions of the ACA has experienced an unwelcome collision with reality. The structure of the ACA relied heavily on the assumption by Congress that the states would voluntarily set up the Health Insurance Exchanges that would provide the citizens of each state without coverage the opportunity to shop for a policy through that state exchange and in comse circumstances obtain a subsidy for that coverage. Well, while we thought that the cake was thoroughly baked, it appears that when you cut into it, there's a lot of uncooked batter left. In today's edition of the Wall Street Journal an editorial column shows that all is not right in the kitchen.

On our way to the Federally driven system, somebody forgot that the individual states were still necessary for implementation. So far, at least 16 states are refusing and more are likely to join that rush for the door when it becomes plain that the ACA is simply not ready for implementation. Ultimately, it looks as though the Federal Government will be responsible for implementing the FEDERAL exchange in between 25-30 states. That's not even the worst of it. The feds themselves are not even ready to set up the FEDERAL exchange. The reason is that Congress assumed that the states would setup the exchanges and run it themselves since the uninsured could only qualify for subsidized coverge if the policy was obtained through a state sponsored exchange. With many states balking and the federal government not having it's own system ready, implementation is going to be dicey. The gargantuan task of designing an online interface that would allow the consumer to shop for insurance (the exchange) that could then interface with IRS data that would show whether the individual qualified for subsidized coverage is quite different from the perception that the websites would simply be a "travelocity for healthcare." However this comes to pass, the idea that the system will be ready for primetime in the next 300 days when it must be in operation, seems little more than fantasy. Another problem is that many states, with their refusal or failure to implement the State Sponsored exchanges may thwart the intention of the ACA to provide subsidized coverage. In a well written white paper called: TAXATION WITHOUT REPRESENTATION: The Illegal IRS Rule to Expand Tax Credits under the PPACA, Jonathan Adler and Michael Cannon of Case Western Reserve University School of Law, have pointed out that the specific design of the ACA may not in fact allow subsidies in states that have not setup the state exchange. The paper, which can be found at [http://ssrn.com/abstract=2106789] points out that " An Internal Revenue Service (IRS) rule purports to extend these tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own. This rule lacks statutory authority. The text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges. The IRS rule is contrary to congressional intent and cannot be justified on other legal grounds. Because the granting of tax credits can trigger the imposition of fines on employers, the IRS rule is likely to be challenged in court." These challenges, if successful may very well create an environment in which businesses in states not subject to a state exchange could then have a competitive advantage against businesses in those states which have set up an exchange. If that happens, watch the unemployment rate in those states without their own exchanges. Finally, the Supreme Court recently ordered the Court of Appeals for Virginia to hear the challenge of Liberty University to the ACA on grounds that the ACA, and not just the mandates from the Department of Health and Human Services, violates the College's religious liberty guaranteed by the first amendment. All in all, it appears that we have many miles to go before we sleep.

Please see the column at: http://online.wsj.com/article/SB10001424127887324556304578121012109574832.html?mod=WSJ_hpp_sections_opinion.

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