Arguments in House lawsuit may pose next threat to ACA

If House Republicans win legal standing in their lawsuit challenging the Affordable Care Act's cost-sharing subsidies, their case could pose another serious threat to the law's coverage expansion.

U.S. District Judge Rosemary Collyer in Washington currently is deciding whether to allow the lawsuit to proceed or dismiss it because the plaintiffs have not suffered an actual harm, and therefore don't have the right to sue. Collyer's questions during recent oral arguments, along with her subsequent information requests, have led some observers to speculate that she will let the plaintiffs argue their case on its merits.

If she does, and her ruling on standing is upheld by the appellate court, some experts say the plaintiffs' substantive arguments have a chance of success. The case comes as the U.S. Supreme Court is set to rule on the separate issue of premium subsidies in King v. Burwell.

House Republicans argue that the Obama administration is illegally spending money that Congress never appropriated for the law's cost-sharing provisions, which mandate reduced deductibles, co-pays and co-insurance for exchange plan members in silver-tier plans with incomes up to 250% of the poverty level. The plaintiffs say the government is projected to pay insurers $175 billion over 10 years to protect consumers from cost-sharing.

“Once you get past standing, I think it's pretty clear these cost-sharing subsidies have not yet been appropriated,” said Andrew Kloster, a legal fellow with the conservative Heritage Foundation.

Kermit Roosevelt, a University of Pennsylvania constitutional law expert, said an argument that an administration has spent money that was not appropriated by Congress is sometimes “a good argument because Congress is supposed to control how money is spent, so the ability of the president to spend money against the expressed will of Congress is limited.” But such limitations are clearest when Congress specifically prohibits spending for certain purposes, he added. That is not the case here.

James Blumstein, a law professor at Vanderbilt University, said the standing issue is tougher than the substantive issue in the case. “If we assume for the sake of discussion that Congress appropriated money for one thing and it was spent on another thing, I think the House position becomes pretty strong once standing is satisfied,” he said.

The administration notes that the ACA directs insurers to reduce cost-sharing for certain individuals, and that insurers have “a legal right to payment for the amount of these cost-sharing reductions.” The law goes on to say that the HHS secretary “shall make periodic and timely payments to the (insurer) equal to the value of the reductions.”

Tim Jost, a law professor at Washington and Lee University who supports the ACA, said he believes the government is correct in arguing that the spending for the cost-sharing reductions is covered by a permanent appropriation. Beyond that, if the courts strike down the funding, he said, it would damage the individual insurance market because insurers still would be required to reduce cost-sharing but they would not be paid for it, forcing them to hike premiums.

To get to the merits, Collyer, who was nominated by President George W. Bush, has to find that the administration's actions caused injury to the House. The plaintiffs claim they were injured because the administration's actions usurped the House's powers. The government counters that “an abstract dilution of institutional legislative power” does not constitute an injury, and that courts should steer clear of political disputes.

During oral arguments last month, the judge seemed skeptical of the administration's claims that the House hadn't suffered any injury from its actions. After the arguments, she also asked to receive by June 15 documents related to funding decisions. All that led some to speculate that Collyer may grant the House standing and hear the case. Jost said it's “troubling” that Collyer seems to be examining the merits of the case before the standing issue is resolved.

But Ankur Goel, a health partner with McDermott Will & Emery, said Collyer's questions might speak to standing. If the disagreement is over the administration's interpretation of the law, then the plaintiffs might not have standing. But if it's over whether Congress appropriated the money or not, then they might have the right to proceed to the merits of the case.

“She's a thorough and diligent judge,” said Goel, who co-authored an amicus brief supporting the administration in King v. Burwell. “It's not unusual for her to ask the government to explain itself. I wouldn't put too much stock in that request (for documents) as to what the outcome is going to be.”