The lawsuit that could sink Obamacare, explained

By Josh Zeitlin, Editor

There's a pending court case over Affordable Care Act (ACA) subsidies that could lead to the collapse of the law's insurance exchanges.

If you're having King v. Burwell déjà vu, you're not alone. Here's what you need to know about the latest case, House v. Price.

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What's the dispute?

The ACA requires insurers to give discounts on out-of-pocket costs—deductibles, coinsurance, and copayments—to individuals with silver-level exchange plans whose household incomes are between 100 percent and 250 percent of the federal poverty level.
Those discounts, called cost-sharing reductions, limit out-of-pocket costs for
more than six million people and are expected to total more than $7 billion in 2017.

The ACA also calls for the federal government to reimburse insurers for those cost-sharing reductions, which the executive branch has been doing. But the GOP-controlled House in Nov. 2014 filed a lawsuit stating that the executive branch does not have the constitutional authority to make those payments. Congress hasn't explicitly appropriated any money for cost-sharing reductions, the House argues, and the Constitution states that "[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law."

The lawsuit in 2014 was called House v. Burwell; its named changed to House v. Price when Tom Price took the helm this year as HHS secretary.

What could happen if the House wins the lawsuit?

Insurers would still be required to give the out-of-pocket cost discounts under the ACA, but the federal government wouldn't be able to compensate insurers without an explicit appropriation from Congress.

But experts say that insurers likely wouldn't issue the discounts without the prospect of reimbursement; rather, they'd likely bolt the ACA's exchanges altogether, which could collapse the marketplaces. Insurers that remained would likely increase their premiums; the Urban Institute estimates that premiums for silver-level plans would increase by an average of $1,040 per person.

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What have the courts said so far?

The first major issue before the United States District Court for the District of Columbia was whether the House had standing to sue the White House over the subsidy payments.

This was no small question, University of Michigan Law School professor Nicholas Bagley writes for Vox: "Congress has never been found to have standing to sue the president over a question pertaining to appropriation." Bagley writes that that's because political branches are supposed to settle such disputes among themselves, and that "the House's job is to pass statutes, not to file lawsuits to determine their meaning."

However, U.S. District Judge Rosemary Collyer in September 2015 ruled that the House does have standing to sue "to preserve its power of the purse and to maintain constitutional equilibrium between the Executive and the Legislature."

Collyer in May 2016 then ruled for the House on the merits of the case, finding that the executive branch does not have the authority to make the cost-sharing reduction payments without Congress first appropriating funding. Collyer in her decision rejected the Obama administration's argument that CSR payments were inherently authorized under the ACA.

The district court then stayed its order that the payments be stopped, and the Obama administration appealed the case.

After President Trump took office, the U.S. Court of Appeals for the District of Columbia granted the House's request to put the case on hold. The House has to file a status report on the case every 90 days, and the next one is due May 22.

What could happen next?

There are a few potential next steps—keeping in mind that insurers have to decide by June 21 whether to participate in the ACA's exchanges in 2018.

The White House could drop the appeal at any time. The cost-sharing subsidy payments would stop, which "could trigger a mass exodus of insurers and lead to the collapse of the marketplaces," Paul Demko writes for Politico. On Wednesday, Price declined to say whether the payments would continue, citing the ongoing litigation. According to Richard Kogan and Edwin Park of the Center on Budget and Policy Priorities, insurers might then seek relief in the U.S. Court of Federal Claims, which could find that insurers are legally due the payments under the ACA. In such a scenario, the government would have to pay insurers—but in the interim, Bagley says insurers would "just pass on the costs of the litigation, delay, and uncertainty to their customers."

Congress could appropriate the money. House Energy and Commerce Committee Chair Greg Walden (R-Ore.) and House Appropriations health subcommittee Chair Tom Cole (R-Okla.) this week both called for lawmakers to fund the cost-sharing reduction payments. However, other GOP lawmakers have objected to providing funding, which they've argued would amount to propping up the ACA.

The House and White House could settle. But according to Bagley, they'd need to ask the district court to toss the case, which could change its previous order only if there had been a "significant change either in factual conditions or in law." So the district court could agree to scrap the case, or "the judge might well balk." This scenario doesn't look likely at the moment: House Speaker Paul Ryan (R-Wis.) said this week that his chamber won't drop the lawsuit, but that the Trump administration would still fund the cost-sharing reduction payments as the case goes forward. However, Association for Community Affiliated Plans CEO Margaret Murray told Axios Thursday that Ryan's comments weren't sufficient to calm insurer concerns. "We need a clear, unambiguous statement from Congress and the administration that they're going to fund the payments, and we have not received that," she said.

They could stall for time. The Trump administration and the House could "ask the appeals court to keep the case on hold indefinitely," which Bagley sees as the most likely scenario. However, "the appeals court may not have infinite patience for that gambit," he writes. And the case's continued existence—and the possibility that the Trump administration could drop its appeal at every time—likely will make insurers nervous. "At a minimum, insurers will hike their premiums to compensate for the systematic risk," Bagley writes.

With 'repeal and replace' on hold (for now), what’s next for health reform?

Eric Cragun, Senior Director, Health Policy

The House GOP's first proposal to repeal and replace the Affordable Care Act was withdrawn without a vote, but that doesn't mean the discussions around health reform are over.

Join our panel of experts on April 10 to hear about up-to-the-minute developments, what President Trump and Congress still may do to stabilize or roll back the ACA, what other policy issues might now enter the spotlight, and what this all means for provider strategy.

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