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August 2, 2017

States can defend CSR payments—even if Trump doesn't, federal appeals court rules

Daily Briefing

    A federal appeals court on Tuesday granted a motion by a coalition of 16 attorneys general (AGs) to participate in the defense of the Affordable Care Act's (ACA) cost-sharing reduction payments in a lawsuit challenging the federal government's authority to make the payments.

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    The Trump administration has been making the cost-sharing reduction payments to insurers on a monthly basis, but has not given any indication on whether the administration will make future payments. Trump in a tweet Saturday threatened to discontinue the payments.

    If Trump discontinues the payments, insurers would still be required to give the out-of-pocket cost discounts under the ACA, but the federal government would not compensate insurers without an explicit appropriation from Congress.

    Some insurers have said they would scale back or withdraw from the exchanges without greater certainty that CSR payments will continue, and others have said the uncertainty could result in larger premium rate increases. Some insurers also have signaled they would file lawsuits if the payments are not made.

    Case details

    The lawsuit, which the House authorized in July 2014, contends that while the ACA authorized cost-sharing reductions to help low-income consumers pay out-of-pocket costs such as coinsurance, copayments, and deductibles, Congress never actually appropriated money for the payments.

    U.S. District Judge Rosemary Collyer in May 2016 ruled that former President Barack Obama's administration did not have the authority to make the cost-sharing reduction payments without Congress first appropriating funding for the payments.

    The Obama administration appealed the ruling to the District of Columbia U.S. Circuit Court of Appeals. But the case has been on hold since shortly after Trump's election, and the Trump administration has been circumspect about whether it will defend the payments. The House and the Trump administration had hoped the case would be rendered irrelevant when GOP lawmakers approved a bill to repeal and replace the ACA, but those efforts appear to be on hold for now after the Senate last week failed to advance a health reform bill.

    Citing the delays, a group of Democratic AGs from 15 states and Washington, D.C., in May filed a motion with the federal appeals court seeking permission to defend the payments, arguing that the Trump administration has not adequately defended them in court.

    The case is expected to resume in court later this month.

    Ruling details

    In the ruling, a three-judge panel for the District of Columbia U.S. Circuit Court of Appeals said the AGs "have raised sufficient doubt concerning the adequacy of [HHS'] representation of their interests," adding that HHS "nowhere argues in its intervention papers that it will adequately protect the States' interests or even continue to prosecute the appeal."

    Further, the judges said the AGs had demonstrated a "substantial risk" that terminating the cost-sharing reduction payments would "directly and imminently" cause insurance premiums to rise and increase the number of uninsured individuals. As a result, the court said public hospitals "will suffer financially when they are unable to recoup costs from uninsured, indigent patients for whom federal law requires them to provide medical care."

    The judges also said the AG's motion was timely in light of "accumulating public statements by high-level officials."

    The ruling allows the AGs to participate in the case by filing briefs and taking part in oral arguments. AGs also will be able to block any potential settlement between the House and the Trump administration or appeal a ruling.


    Several experts said the ruling could prevent the Trump administration from unilaterally dropping its appeal of the case and allowing a lower court's injunction to halt the payments to take effect.

    Nicholas Bagley, a professor at the University of Michigan Law School, called the ruling a "big deal." He said, "Allowing the states to intervene will increase the pressure on the administration to keep making the cost-sharing payments." That said, he acknowledged that the administration could still determine that it will not continue to make the payments.

    However, Tim Jost, emeritus professor at the Washington and Lee University School of Law, in a Health Affairs blog post wrote, "If the administration does stop making the payments, the states—or insurers, or possibly consumers—would be able to sue to require the payments to be made and the injunction entered by the lower court would not be as much of a roadblock to their prevailing."


    New York Attorney General Eric Schneiderman in statement said, "The court's decision is good news for the hundreds of thousands of New York families [who] rely on these subsidies for their health care. It's disturbingly clear that President Trump and his administration are willing to treat them as political pawns."

    The White House issued a statement in response, saying, "The President is working with his staff and his cabinet to consider the issues raised by the CSR payments."

    The next set of payments is due in three weeks, and insurers face a mid-August deadline to file premium rates for the 2018 coverage year. Insurers must make final decisions about whether or not to participate in the exchanges by late September (Goldstein, Washington Post, 8/1; Hurley, Reuters, 8/1; Roubein/Seipel, The Hill, 8/1; Livingston, Modern Healthcare, 8/2; Bagley, Incidental Economist, 8/1).

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