A federal appeals court on Tuesday night gave 17 states and the local Washington, D.C., government a right to join in a major constitutional lawsuit, to defend subsidies that reduce the cost of health insurance coverage under the Affordable Care Act.
The U.S. Court of Appeals for the District of Columbia Circuit took that action over the objections of the Trump Administration, which has been threatening to end the subsidies, and of the Republican leaders of the House of Representatives, who have claimed that the subsidies at issues are unconstitutional.
The three-page order by the appeals court did not decide anything about the lawsuit in a final way, but its order raised the prospect that the case would continue to proceed even if the Trump Administration attempted to scuttle it by abandoning its participation in the case or by cutting off the subsidies, which it has indicated it might do. The order was issued by a “motions” panel of three judges; although chosen at random, it turned out that all three of the judges were among the more liberal members of the D.C. Circuit Court.
The order accepted the three key arguments by the states: that their interests would be seriously harmed if the subsidies at issue were ended, that the Trump Administration will not adequately protect their interests, and that there is at least an open legal question about whether the Administration could simply choose to end the subsidies by its own action.
In giving the 17 states and the D.C. government a right to formally enter the case in defense of the subsidies, the Circuit Court cited “accumulating public statements by high-level officials” about a change in position on the subsidies’ validity and the decision by the Justice Department in the new Administration to ally itself with the House GOP leaders “in an effort to terminate” the pending case.
If the new order does turn out to mean that the subsidies have gained a new legal chance to continue, that would be of increasing importance in the wake of the failed attempt last week by the Trump Administration and GOP leaders in the Senate to get “repeal and replace” health care legislation passed. Because of that failure, President Trump has said that, now, the government should simply let the ACA law collapse on its own – an event that would be more likely to happen if the Administration were to take unilateral action to end the subsidies.
In the meantime, a number of health insurance companies have been backing out of offering insurance on the insurance exchanges operated by the states, citing the uncertainty about whether the system would continue. They have argued repeatedly that they cannot afford to make insurance more affordable without such subsidy support from the government, especially if the policies must contain all of the benefits required by the ACA.
Although the new order noted that the Trump Administration, in opposing the states’ move to defend the subsidies, had argued in a court filing that it had the unilateral authority to suspend the subsidies, the judges added that that “is a debated legal question.” It added that the states had shown that they deserved an opportunity either to try to persuade the government to keep up the subsidies, or to compel it to do so.
At issue in this constitutional controversy is the fate of the so-called “cost-sharing reduction” (or CSR) payments. That is one of two types of subsidies included in the ACA as part of the basic financial mechanisms to make the system of insurance marketplaces (“exchanges”) function and continue to survive financially.
One subsidy system – not at issue in this case – involves direct financial support to consumers to help them afford to buy insurance on the exchanges. The other system – directly challenged in the case – involves payments made directly to insurance companies to induce them to reduce the costs that consumers would have to pay for insurance – such as co-pays or higher deductibles – when they seek coverage on an exchange.
The disputed subsidies to insurers are expected to reach $9 billion in the year that ends on September 30, and have been predicted to rise – if they continue – to $16 billion by 2026. Although the subsidies have been under challenge, the Trump Administration has opted to continue paying them, for the time being.
The GOP leadership of the House had sued in federal court to try to get the insurance company subsidies struck down, on the theory that Congress did not directly authorize any federal funds to cover those payments – as the Constitution requires for any federal spending. The Obama Administration defended the system in that lawsuit, arguing that Congress had actually given specific authorization. The Obama legal team also has argued all along that the House did not have a right to sue to challenge the subsidies.
A federal trial judge, in a District Court in Washington, D.C., upheld the House’s right to sue and ruled that the cost-sharing subsidies were invalid because not authorized by Congress. That decision has remained on hold as the Obama Administration took the issue to the Circuit Court in an appeal.
When the Trump Administration came into office this year, it persuaded the Circuit Court to keep the case in a suspended state, with no action, until it could make up its mind what its legal position would be on the insurance company subsidies. As of today, it has yet to take a formal legal position on the validity of the payments, but has expressed skepticism repeatedly.
In the order issued Tuesday evening, the Circuit Court continued to keep the case on hold, but ordered the government and the House – and, now, the intervening states – to give the court updates every 90 days on the status of the case.
In allowing the states and the D.C. government a right to intervene, as well as specific permission to pursue that right, the Circuit Court accepted virtually all of the arguments by the states’ attorneys general about the harms their governments would be likely to suffer if the insurance company subsidies were scuttled. It is the state governments that actually operate the insurance exchanges, even though they were set up under federal law, in the ACA.
The Circuit Court order was issued in the name of a motions panel, made up of Circuit Judges Patricia A. Millett, Cornelia T.L. Pillard and Robert L. Wilkins. They are the most junior judges on the 11-member Circuit Court.
