If House Republicans win their lawsuit against the Obama administration over the Affordable Care Act, the federal government could wind up paying an additional $47 billion over 10 years to keep the program running, according to a new brief by the Urban Institute.
The lawsuit (PDF) alleges that the administration is illegally spending money that Congress never appropriated for the ACA's cost-sharing provisions. Those provisions include reduced deductibles, copayments and coinsurance many Americans receive, depending on income, for plans purchased through the ACA's insurance exchanges.
Last year, U.S. District Court Judge Rosemary Collyer surprised many by allowing the case to proceed (PDF), ruling that House Republicans had standing to sue the administration. Collyer was appointed by President George W. Bush.
Many consider the lawsuit, U.S. House of Representatives v. Burwell, to be the most prominent remaining challenge to the healthcare law.
If House Republicans win that lawsuit, costs to the federal government for keeping the law afloat could skyrocket, according to the Urban Institute, which does economic and social policy research.
That's because the ACA requires insurers to offer cost-sharing reductions regardless of government funding. Without government reimbursement, insurers may offset those losses by increasing premiums on marketplace silver plans. That, in turn, would cause premium tax credits to rise to cover the higher premiums.
The government would then be on the hook for those higher premiums tax credits, which would go to many more people than just those who receive cost sharing reductions, according to the brief.
The Institute also projects that 1 million people who are not eligible for premium subsidies might drop out of the exchanges if premiums rise, reasoning that they could find cheaper coverage. About 400,000 now uninsured people, however, would likely gain coverage because the higher premium subsidies would entice them to enter the exchanges where they could buy better plans than would have been available to them in the past, according to the brief.
The case isn't as big a threat to the law as past ones considered by the U.S. Supreme Court, experts say. But the Urban Institute's estimates show it could make the law more costly and cause complications.
“It's disruptive, it's clearly cost-increasing, but it's not something that would necessarily undermine the pillars of the law,” Blumberg said.
The authors acknowledge that their projections are just one of a number of possible scenarios should the Obama administration lose the case.
It's also possible insurers would sue the federal government for the reimbursements, arguing the government is obligated to provide them. Or, insurers may simply drop out of the exchanges, frustrated by the seemingly endless litigation against the law and the uncertainty it creates.
It's also possible Congress could appropriate the money for the cost-sharing reductions.
"There is substantial uncertainty around insurer decisions to continue to offer marketplace coverage in the event of a finding for the plaintiff," according to the brief. "The timing of such a change in policy could interfere with established, approved premiums, potentially creating financial losses for insurers and chaos for enrollees."
But University of Michigan Law Professor Nick Bagley said the broad scenario painted by the Urban Institute is certainly possible.
“A victory by the House is going to force health insurance companies to raise their premiums, which is going to result in the federal government having to spend more per person to get affordable insurance,” Bagley said.
Bagley recently wrote in a draft paper to be published in the University of Pennsylvania Law Review that by financing cost-sharing reductions out of an appropriations governing tax refunds, President Barack Obama “appears to have broken the law.”
Bagley, however, said he believes a federal appeals court will ultimately reverse the district court's decision on House Republicans' standing to sue over the matter.
Josh Blackman, an associate professor of law at South Texas College of Law, said it's no surprise that a House win may result in higher costs for the government for the ACA.
“Whenever the law's been modified by the executive, whenever the executive takes action that delays provisions of the law, that results in premiums going up and when premiums go up, that increases the amount of subsidies that have to be paid out,” Blackman said. “This seems like par for the course.”