The train wreck rolls on

As we keep peeling the onion of Obamacare, here's a new one: the language of the legislation very explicitly states that federal subsidies can be distributed only through state-run health exchanges.  But only 16 states have been foolish enough to sign up so the Administration just says "never mind."  Hit and Run: "Obamacare backers: Ignore what Obamacare says!"

The law expands health coverage by providing subsidies to people buying health insurance through government-run health exchanges—online marketplaces intended to allow people to compare and purchase health plans. But the text of the law clearly states that those subsidies are only available to individuals who purchase insurance in exchanges erected by states. The Internal Revenue Service, however, has ruled that the subsidies will be also be available in the 34 exchanges run by the federal government. 

One argument by Obamacare backers is that Congress wouldn't be so stupid to add a "poison pill" to its own legislation.  (Oh, don't be so sure.)  So the work-around is to say "never mind" in exactly the same way they insisted the individual mandate was not a tax before arguing at the Supreme Court that the mandate was contained in the government's power to tax.

Update - I'm not a lawyer (although I play one on TV) and this comment is a thoughtful rejoinder so I'll reproduce it here, if it's OK with Scotus:

"There are a lot of other words in those 20,000 pages we heard so much about. Let's look at some of the words in Section 1321. It states that if a state "will not have any required Exchange operational" by the deadline - that is, an exchange required by Section 1311 - then the federal government "shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State."

The law's defenders will certainly argue, with ample legitimacy, that the phrase "such Exchange" refers specifically to a state exchange operated by the federal government, identical to the others other than its oversight. That is, the law tells states "you can drive your car, otherwise we will." The exchanges are required; the state's participation is optional. Should they opt out, they cede the operation and cost to Washington.

Further, the "commandeering" principle argued in the lawsuit has little legal basis. Premium subsidies can be offered by Congress to entice states to participate, but Congress cannot compel states to participate. See Hodel v. Virginia Surface Mining (1981), in which the Court found "If a State does not wish to submit a proposed permanent program that complies with the Act and implementing regulations, the full regulatory burden will be borne by the Federal Government."

http://scholar.google.com/scholar_case?case=8220962603178506132&q=new+york+v.+united+states&hl=en&as_sdt=2,23&as_vis=1

This is a federal law. For those states that decline to "opt in," the law provides for a federal replacement in whole - not in part, and not at a lesser rate of funding.

The counterargument that Congress created a two-tiered system of greater and lesser universal coverage is going to be a tough one for the petitioners to sell. Especially after Hodel above, and also after the Supreme Court's decision in New York v. United States (1992):

http://scholar.google.com/scholar_case?case=9243582117703452379&q=new+york+v.+united+states&hl=en&as_sdt=2,23&as_vis=1

Backdoor underfunding is a fine political strategy, but it's not case law."