Surely, you say, there must be studies showing that Xenia and other soft corals need iodine from the water column? Well, I could find none. There may be studies that I could not find, and regardless of whether there are studies, iodine in the water column may or may not have a significant impact on these organisms. Nevertheless, there is no published basis (that I could find) for many of the claims about iodine.
There are studies that show that Xenia does contain substantial iodine, and it is likely that it got it from the water column, but what good, if any, that iodine serves is unknown. In a recent publication, Ron Shimek showed that a wild specimen of Xenia sp. contained 350 ppm iodine on a wet basis and a captive specimen showed 270 ppm on a wet basis and 1350 ppm on a dry basis. Those values are as high as some of the macroalgae, and lend some support to the idea that Xenia accumulate iodine (and presumably have a use for it at such high accumulations).
Of course, accumulating iodine from the tank somehow, and showing that supplemental inorganic iodine is beneficial are very different. I am in the planning stages of running experiments on the possible benefits of iodine supplementation to certain soft corals, but the technical challenges are significant (much more so than similar tests on macroalgae), and I’m not certain that they will be successful.