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No sign Congress meant to limit health exchange subsidy: CBO

WASHINGTON (Reuters) - In a development that could complicate Republican efforts to limit funding for a key provision of President Barack Obama's healthcare law, a top congressional researcher said the issue of restricting subsidies never arose in producing the legislation.

Congressional staff involved in the creation of the law did not suggest that federal insurance subsidies be restricted only to states that run their own healthcare exchanges, the head of the nonpartisan Congressional Budget Office said on Thursday.

"Nor was the issue raised during consideration of earlier versions of the legislation in 2009 and 2010," CBO Director Douglas Elmendorf informed Republican Representative Darrell Issa in a letter dated December 6.

The question of how Congress intended federal subsidies to be used in healthcare exchanges lies at the heart of a political debate about whether Washington should be allowed to use premium tax credits to defray the cost of health insurance policies sold on federally operated exchanges.

The exchanges, online marketplaces that are scheduled to begin offering working families private insurance at subsidized rates beginning January 1, 2014, are intended to extend health coverage to 16 million uninsured Americans.

But Republicans including Issa, who chairs the U.S. House of Representatives Committee on Oversight and Government Reform, argue that Congress meant to make those subsidies available only in exchanges run by states, and not by the federal government.

With analysts estimating that Washington could wind up operating exchanges in as many as 30 states, any move to choke off subsidies could threaten to cripple the reform provision.

Democrats insist the law was only poorly worded and that Congress intended subsidies to reach all exchanges. The Internal Revenue Service proposed a rule to that effect last year, stirring Republican accusations that the agency was pressured by the White House, a charge the IRS denies.

The CBO letter surfaced a week before a December 14 deadline for states to declare whether they plan to pursue their own exchanges. At least 17 states have already said they intend to do so, according to the nonpartisan Kaiser Family Foundation.

But 19 predominantly Republican-led states - including Texas, Louisiana, South Carolina, Wisconsin, New Jersey and Maine - have chosen not to operate their own exchanges, requiring the administration to set up federal marketplaces within their borders.

Five states are pursuing federal-state hybrid exchanges in partnership with the administration, while nine others are undecided, according to Kaiser.

The CBO letter came in response to a request from Issa, who sought details about the research office's assessment of the reform law's exchange provision. Issa, from California, whose committee is investigating the subsidies issue, has challenged the administration's authority to administer the healthcare law in states that refuse to cooperate.

Outside groups opposed to the 2010 law, known as the Patient Protection and Affordable Care Act, have said they may consider legal action to prevent subsidies from reaching federally-operated exchanges.

(Reporting by David Morgan; Editing by Tim Dobbyn)

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