'Federal exchange subsidies may cost taxpayers in excess of $500 billion,' Issa said. | JAY WESTCOTT/POLITICO Treasury rejects Issa subpoena threat

The Treasury Department, rejecting a subpoena threat from the House Oversight and Government Reform Committee, is citing executive branch “confidentiality interests” in its refusal to turn over documents on an IRS rule allowing subsidies in federal health insurance exchanges.

“Obamacare” opponents argue that the law only allows subsidies to flow through state-run health exchanges — the new marketplaces for health insurance that are supposed to begin in 2014 — and that the IRS rule oversteps legal bounds. Under the law, the Department of Health and Human Services is supposed to set up federal exchanges in states that don’t build their own.


Agency officials this summer defended the rule before two House committees, contending that an entire reading of the law clearly intended for the subsidies to be available in federal exchanges, too.

The Oversight panel had ordered the IRS and Treasury to turn over documents by Thursday that would shed light on how the agencies formed the legal basis for the subsidy rule. Instead, the Treasury claimed that the executive branch needs to keep those documents private.

“It is well-established that agency staff and counsel must have the ability to engage in free, full, and unfettered discussions and debate about important policy and legal matters,” wrote Alastair Fitzpayne, Treasury assistant secretary for legislative affairs. “Accordingly, as the Executive Branch has long maintained, public disclosure of such material could have a significant chilling effect on agency staff and could inhibit their ability to fulfill their statutory responsibilities.”

The Treasury letter asserts that the department’s interpretation should be settled “through the judicial process,” referencing a lawsuit that Oklahoma Attorney General Scott Pruitt filed against the IRS rule last month.

Though the Oversight committee threatened a subpoena earlier this week, a Friday afternoon statement from Chairman Darrell Issa (R-Calif.) didn’t indicate how the panel would respond to Treasury’s refusal to turn over the documents.

“Federal exchange subsidies may cost taxpayers in excess of $500 billion over the next decade,” Issa said. “The Administration’s refusal to shed light on the development of this half-trillion dollar extra-legal rule is stunning.”

This article first appeared on POLITICO Pro at 5:25 p.m. on October 26, 2012.

CORRECTION: This story has been updated to correct the description of the Treasury Department’s reason for refusing to turn over the health care documents. The department is citing “confidentiality interests” of the executive branch, not executive privilege.

CORRECTION: Corrected by: Elizabeth Titus @ 10/26/2012 07:14 PM CORRECTION: This story has been updated to correct the description of the Treasury Department’s reason for refusing to turn over the health care documents. The department is citing “confidentiality interests” of the executive branch, not executive privilege.