Appeals court rules states can fight to preserve ACA subsidies

A federal appeals court on Tuesday said state attorneys general can defend the Affordable Care Act's cost-sharing subsidies in a legal case over whether the federal government must keep making the payments.

A three-judge panel for the U.S. Court of Appeals for the District of Columbia Circuit held that 16 state attorneys general may intervene in House v. Price because they showed a "substantial risk" that terminating the cost-sharing reduction payments, or CSRs, would "directly and imminently" cause an insurance premium hike and lead to more people becoming uninsured.

The appellate court's order is a major development in the case, which started during the Obama administration. President Donald Trump has repeatedly threatened to end the CSRs, labeling them insurer "bailouts."

The appellate court order allowing states to intervene means the Trump administration cannot unilaterally stop the CSR payments and dismiss the appeal, according to Tim Jost, emeritus professor at the Washington and Lee University School of Law and an expert on healthcare reform.

"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," he wrote in Health Affairs.

In May, 16 state attorneys general from both Republican- and Democratic-led states, led by California and New York, asked the federal appeals court for permission to intervene in the case. The lawsuit was originally brought by House Republicans to block federal payment to insurers to fund the Affordable Care Act's cost-sharing reduction subsidies for low-income exchange plan members.

A U.S. District Court judge in May 2016 agreed with House Republicans that the Obama administration had been illegally funding the payments without congressional appropriations. The Obama administration appealed the ruling. Now the case is on hold in the D.C. Circuit.

The Trump administration has been paying the subsidies on a month-by-month basis. But Trump has threatened to quit funding them as a way to encourage Congress to pass a healthcare bill. Experts say the individual insurance market would likely collapse without funding for the cost-sharing reductions.

The state attorneys general argued that the Trump administration was not adequately representing their interests in the appeal of the May 2016 District Court ruling. They claimed their states' interests would be harmed if the subsidy payments stopped because many insurers would exit the individual insurance market, premiums would rise and many state residents would be left uninsured, with the state and local governments facing heavy costs in paying for medical care for the newly uninsured people.

"The court's decision is good news for the hundreds of thousands of New York families that rely on these subsidies for their healthcare," New York Attorney General Eric Schneiderman said in a statement. "It's disturbingly clear that President Trump and his administration are willing to treat them as political pawns; but this coalition of attorneys general stands ready to defend these vital subsidies and the quality, affordable healthcare they ensure for millions of families across the country."

An​ edited​ version​ of​ this​ story​ can​ also​ be​ found​ in​ Modern​ Healthcare's​ Aug.​ 7​ print​ edition.