A federal judge has upheld an IRS regulation that would allow taxpayer subsidies for federally run health care exchanges, even though the law stipulates that subsidies only go to exchanges set up by the states.

U.S. District Court Judge Paul Friedman, who was appointed to his seat by Bill Clinton, based his ruling on Congress' intention to have Obamacare exchanges in every state.

"Even where a state does not actually establish an exchange, the federal government can create 'an exchange established by the state' under Obamacare on behalf of that state," Friedman wrote in upholding the IRS rule in Halbig v. Sebelius.

"The court [ruled with the government] despite its own finding that our arguments were supported by the plain language of the law’s key provision," Sam Kazman of the Competitive Enterprise Institute, which has coordinated the lawsuit on behalf of a group of business owners and individuals six states, said of the ruling. "We will appeal this decision."

The judge invoked congressional intent throughout his opinion. "[CEI's] theory is tenable only if one accepts that in enacting the [Affordable Care Act], Congress intended to compel states to run their own exchanges — or at least to provide such compelling incentives that they would not decline to do so," Friedman wrote in the Jan. 15 opinion. "The problem that plaintiffs confront in pressing this argument is that there is simply no evidence in the statute itself or in the legislative history of any intent by Congress to ensure that states established their own exchanges."

Friedman also based the opinion on the fact that Congress, when it passed the law, wanted exchanges to operate in every state.

"A state-run exchange is not an end in and of itself, but rather a mechanism intended to facilitate the purchase of affordable health insurance," he wrote. "And there is evidence throughout the statute of Congress’s desire to ensure broad access to affordable health coverage."

Sen. Ted Cruz, R-Texas, described the IRS rule before Friedman's opinion came out as another example of Obama taking over legislative power that properly belongs only to Congress.

“The plain text of the statute contradicts the way the Obama administration has implemented it,” Cruz told Slate's Dave Weigel. “the law is clear that the individual mandate and the accompanying subsidies only apply if a state sets up an exchange. The Obama administration simply said, ‘we're not following that part of the law. We're going to apply it without a state exchange.' In our constitutional system, if a president doesn't like a law, there's a mechanism to address that. You go to Congress, and you change the law.”