An Exchange Established by the State

Section 1311 of the Affordable Care Act grants “an Exchange established by the state” authority (to issue subsidies), but doesn’t mention an Exchange established by the federal government.

HealthCare.Gov is an exchange established by the federal government, on behalf of the states. The federal government, under the power of the HHS secretary, is given authority to do pretty much everything related to exchanges, however it’s never expressly given power to issue subsidies in the PPACA.

  • Section 1311 of the Affordable Care Act gives “an Exchange established by the state” authority to enter into an agreement with an eligible entity to carry out 1 or more responsibilities of the Exchange.
  • Sec 1401 uses that authority to grant subsidies.
  • Later rulings by the IRS clarified that this includes an exchange established by the federal government on behalf of the state.
  • The lawsuit states that the IRS didn’t have the authority to do this.
  • A simple fix would be congress amending the law to include something to the effect of “or the federal government” to section 1311.
  • Failure to provide a fix could jeopardize subsidies for millions if the court rules in favor of King.
  • Oral arguments begin March 4th. A ruling isn’t expected until June.

This is the key to understanding King V. Burwell, the upcoming supreme court case which begins hearing arguments this week. Please note, there are a number of other related lawsuits which all charge the same thing.

No matter what side of the isle you stand on, the technicality referenced 9 times in the 955 pages of the compilation of the PPACA, could be the Achilles heel of health care reform in the united states.

Given it’s importance, go ahead and open up the compilation of the PPACA and do a command find for “an Exchange established by the State”. How do you think this should be interpreted by the courts?


Author: Thomas DeMichele

Thomas DeMichele is the head writer and founder of,, and other websites. He has been in the health insurance and healthcare information field since 2012. is a...

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Sec 1311 (f) FLEXIBILITY.
—An Exchange may operate in more than one State if—
(A) each State in which such Exchange operates permits such operation; and
(B) the Secretary approves such regional or interstate Exchange

So the Exchange for a given state does not have to be built or run exclusively by the government of that state. The 34 states that did not create their own specific exchanges efffectively chose as the Exchange for their state.


In Section 1311 of the Affordable Care Act gives “an Exchange established by the state” should be interpreted to define “the state” to mean “the government” federal included.


And that’s the question the Court is going to answer (either narrowly to apply to just this case or broadly to cover all of our laws) — Do we as a nation take our laws literally? Or are all of them open to broad interpretation? This decision will have far-reaching impact. (If only Congress had taken the time to read what they were voting on back then.)

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